Douglas Alexander: I am still struggling to establish whether that contribution was pro-nuclear or anti-nuclear—[Hon. Members: "Both."]—which, in a nutshell, is a challenge not unique to the hon. Gentleman, but which applies to his whole party. Of course we welcome and congratulate people on the work that is being done effectively at Dounreay. There will be challenges in terms of how the work force can use the skills that have been developed over a number of decades. I would be happy to receive representations on that matter from him.

David Cairns: The hon. Gentleman is entirely correct to say that there is a multitude of opinions on the matter. That is why his colleague the shadow Defence Secretary, not to mention his colleague the former Foreign Secretary, have legged it in the opposition direction of his proposal to create a multitude of types of MP in this House. Not only that, but Professor Vernon Bogdanor, who successfully torpedoed the last daft proposal that emerged from the Benches opposite—the Bill of Rights—has said that the in-out solution that the Conservatives are putting forward would be the worst of all possible worlds. When will the hon. Gentleman accept that his proposal to have a multitude of different MPs in this House is a massive step along the road to breaking up the United Kingdom?

Mr. Speaker: Speaking of questions, I jumped a question, so we go back to Question 4. I callMr. Lazarowicz.

Douglas Alexander: I have discussions with Cabinet colleagues on a range of subjects. The OECD's "Boosting Jobs and Incomes" report shows that, for the first time in50 years, the UK has a higher employment rate and a better combination of unemployment and inactivity rates than any other major industrialised country. The latest labour market statistics show that economic activity in Scotland is at the highest level ever recorded.

Angela Smith: I congratulate my hon. Friend on her commitment and persistence on this issue. She will be aware that in care homes for vulnerable adults measures are already in place through building regulations. We need to consider who is at risk, the level of that risk and the best way to address it. The building regulations review provides an opportunity to do that. I can give my hon. Friend an assurance that we well look carefully at the matter to see what can be done.

Ruth Kelly: It is very important that we have appropriate hostels so that rough sleepers can be properly accommodated, that we take action on bed-and-breakfast accommodation so that families do not have to bring up their children in cramped conditions, and that we encourage local authoritiesto move people from expensive temporary accommodation into more permanent settled homes. The Government, as the hon. Gentleman will know, have taken action across all those fronts, with rough sleeping falling by 75 per cent.; we are endingthe number of families in bed-and-breakfast accommodation, and investing £19 million in hostel provision. There may well be individual areas where yet more needs to be done, and we as a Government, working with Labour local councils, are committed to making that happen.

Ruth Kelly: The hon. Gentleman makes an important point. It is important that we work not only with local authorities but with the voluntary and charitable sector, to enable people to live independently for longer in their own homes, and also to support them in whatever form of accommodation is needed. We are investing about £1.8 billion through the supporting people programme, which enables people to live independently for longer. But it is also right to invest more money in hostel provision, which weare doing, and which increasingly links the accommodation needs of individuals with their job-search needs and other needs, to enable them to live independently.

Ruth Kelly: My hon. Friend is right to draw attention to housing benefit and how it is framed, and, of course, my Department and the DWP work very closely on those issues. Let me highlight one issue. We are working with innovative local authorities such as Newham to recycle some of the proceeds from housing benefit when they use the private sector rather than the social rented sector to house vulnerable families, so that they can move more families from high-cost temporary accommodation into settled accommodation. I would like to see such innovative schemes expand. Later this year we will announce a fund for London, which may be replicated elsewhere, and which will allow such schemes to be developed further.

Yvette Cooper: My hon. Friend is right. We should be doing more through the planning system to encourage more social housing. Clearly, the situation will vary from area to area, but, nevertheless, that is an important approach, which I know that my hon. Friend feels strongly about and has campaigned for. There are ways to use the planning system better, including by using the section 106 system to support and fund a lot of the new homes that are badly needed in local communities.

Yvette Cooper: As the hon. Gentleman will be aware, his party cut investment in social housing, whereas ours has increased it. It is certainly right that land prices and construction costs were significantly lower in the early 1990s, but that was because his party engineered a massive housing market crash. I hope that that is not his approach to providing new social housing now.
	The hon. Gentleman raised the issue of empty homes. He is right to say that local authorities and housing associations need to address the problem of empty homes in their areas and ensure that they are refurbished and fit for use. That is why we are putting so much money into the decent homes programme, and thus dealing with the massive backlog of repairs that his party left behind. It is irresponsible of Conservative Members to say that we must do something about the scandal of derelict and abandoned homes that have been left to blight communities, but then to oppose every single measure designed to do somethingabout it.

Brian Iddon: My right hon. Friend surely knows that the Bolton ALMO is unique in that it is the only ALMO that is regenerating estates in both the public and private sector. Will she therefore consider extending the Bolton model to other areas with high housing demand, especially urban areas with high waiting lists? She will also know that the Bolton housing waiting list has quadrupled in recent years.

Greg Hands: Will the Secretary of State also have a look urgently at the level of ALMO debts that are accumulating throughout the country? The debt portfolio of my local council, Hammersmith and Fulham, is growing—it was projected to grow under the previous Labour administration—from about £295 million to about £500 million. Almost all of that was due to ALMO debt. Does the right hon. Lady think that that is sustainable? In only four years there has been a£200 million increase in debt.

Claire Curtis-Thomas: When large construction companies go bust, a significant number of small to medium-sized enterprises that have completed their work for the large company will invariably go bust as well. SMEs, as we know, are the backbone of the construction industry and payment security is vital for them if they are to survive. Will my right hon. Friend ensure that during the review,part 2 of the Housing Grants, Construction and Regeneration Act 1996 will be amended to ensure that payment uncertainty in the construction industry is brought to an end?

Mr. Secretary Hutton, supported by the Prime Minister, Mr. Secretary Prescott, Mr. Chancellor of the Exchequer, Mr. Secretary Alexander, Ms Secretary Hewitt, Mr. Secretary Hain, Mr. Secretary Darling, Mr. Jack Straw, Ms Harriet Harman, Mr. Jim Murphy and Mrs. Anne McGuire presented a Bill to make provision about social security; to amend the Vaccine Damage Payments Act 1979; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Wednesday 5 July, and to be printed. Explanatory notes to be printed[Bill 208].

Julie Morgan: I beg to move,
	That leave be given to bring in a Bill to make provision for security of tenure for Gypsies and Travellers on local authority caravan sites; and for connected purposes.
	I should like to begin by describing a case that brings security of tenure for Gypsies and Travellers into sharp focus and demonstrates the vulnerability of their position and the resulting injustice. In May 2004, the European Court of Human Rights decided the case of Connors  v. the United Kingdom, in which the claimant had been evicted from an official local authority Gypsy site on which she had resided for many years. There were allegations of nuisance, but the local authority did not have to plead those allegations nor prove its case in the possession action that it took in the county court because the Caravan Sites Act 1968 provides that all that a local authority has to do to gain possession of a pitch on a Gypsy site is to provide 28 days' notice of termination of the Gypsy's or Traveller's licence and then obtain a court order. In Connors  v. the United Kingdom, the local authority had served such a notice, leaving the occupant without a defence. The court could neither scrutinise the allegations that had prompted the local authority to serve the notice nor decide whether they were proved and, if proved, decide whether it was reasonable for a possession order to be made. The European Court of Human Rights decided that that lack of any procedural safeguard was a clear breach of the occupant's rights under article 8 of the European convention on human rights, which provides a right to respect for that person's home, private life and family life.
	Looking back on that case now, one could say that that appears to be an obvious conclusion. Most council tenants in bricks and mortar housing have full security of tenure under the Housing Act 1985. Only those on a trial period under an introductory tenancy, those whose tenancy has been demoted for antisocial behaviour, or those in accommodation for the homeless do not enjoy those full rights. If a local authority wishes to take possession proceedings against a council secure tenant, it must establish one of the grounds of possession in the Act. In the case of discretionary grounds, as in cases involving rent arrears or nuisance allegations, the court must also be satisfied that it is reasonable to grant a possession order.
	In November 2004, the Government sent a memorandum to the Council of Ministers indicating that they accepted that they would have to change the law to introduce security of tenure on official local authority Gypsy and Traveller sites. The indications given at the time were that this would be achieved by referring the matter to the Law Commission, which was working on reforms to security of tenure with regard to tenancies of bricks and mortar dwellings. While that was awaited, Gypsies and Travellers on official sites remained without security of tenure.
	In the meantime, on the face of it, local authorities were still entitled to seek a possession order without pleading or proving any grounds of possession. Relying on the Connors case, lawyers representing Gypsies and Travellers facing eviction were compelled to resort to article 8 of the European convention and to argue that this could provide a defence to the county court claim for possession of the land, oblige the court to investigate the allegations and decide the issues, and entitle the court to refuse to make a possession order where it considered it disproportionate to do so.
	However, to succeed in that argument Gypsies and Travellers had to overcome the decision of the House of Lords in London Borough of Harrow  v. Qazi, decided in July 2003. The House of Lords decided that the defendant could not rely on article 8 as a defence, as the domestic legislation provided an automatic justification for any interference with his right to respect for his home and family life.
	The challenge to Qazi returned to centre stage in March this year, when the House of Lords, sitting as a seven-member court, heard the cases of Kay  v. London borough of Lambeth and Price  v. Leeds city council together. By a majority of four to three, the House held that the Connors ruling was, to a limited degree, inconsistent with its decision in the Qazi case. It decided that the Qazi ruling must be modified to the extent that in cases of a special and unusual kind, such as the Connors case, interference with the occupier's article 8 rights would have to be justified by a decision-making process that ensured that some special consideration was given to those interests.
	In May 2006, the Law Commission produced a consultation document entitled "Renting Homes: The Final Report". It is the commission's final report—now out for consultation—on the question of reform of security of tenure for tenants of dwelling houses. Despite what had been indicated soon after the Connors decision, there is no reference by the Law Commission to the situation on Gypsy sites. Moreover, it would appear to be by no means certain that the Law Commission's draft legislation—appended to its report—will go any further. In the light of that, there are still no firm proposals from the Government on what should be done about security of tenure for Gypsies and Travellers on permanent official sites.
	I ask this: why should the clearly delineated statutory protection afforded to a council "bricks and mortar" tenant not also be available to a Gypsy or Traveller occupying a pitch on a permanent local authority site in the same circumstances? Both the European Court of Human Rights and the House of Lords have held the present law enacted by Parliament to be in breach of article 8 of the convention, which provides for the right to respect for a person's home and family life. The rights of Gypsies and Travellers on official sites are also in stark contrast with the charter of rights—recently significantly strengthened by the Housing Act 2004—given to occupants of pitches in park homes regulated by the Mobile Homes Act 1983.
	More than 50 years after the United Kingdom signed the European convention on human rights, why should Gypsies and Travellers on local authority sites be compelled to rely on the ingenuity of housing and human rights lawyers—and, of course, their availability—to gain what can only be called basic human rights, whereas "bricks and mortar" dwellers have their rights clearly enshrined in statute and readily applied by the courts? The threat of losing one's home, with the risk of children being taken into care, is a frightening experience, not just for the tenant or licensee of a pitch but for the whole family.
	Parliament's intervention in the form of section 211 of the Housing Act 2004, which gives the courts power to suspend possession orders, does not deal with the mischief that I seek to cure in the Bill. The current state of the law continues to be a source of anxiety, distress and hardship to Gypsies and Travellers on official sites, and clearly defined rights need to be enacted. I tabled the Bill for that reason, and I thank Chris Johnson of the Community Law Partnership and Andrew Ryder for their help in drafting it.
	The Bill is designed to adapt the provisions that apply to secure tenants under the Housing Act 1985 to the circumstances of Gypsies and Travellers on official sites. It provides for such rights to be acquired after a successful trial period, and to be lost by means of a demotion order when abused through antisocial behaviour. All that I seek to do is put occupants of local authority official sites on a par with occupants of local authority "bricks and mortar" accommodation. If Gypsies and Travellers on official sites are to be given equivalent security of tenure, it follows logically that they should also have the rights enjoyed by tenants of council housing in relation to succession, assignment, right to exchange and relevant repairing obligations. Accordingly, those matters are also included in the Bill.
	In passing, I should like to mention the initiative of Oxfordshire county council, which, in producing new licence agreements for its six county council sites in July 2005, included such rights as a matter of contract.
	The Bill is intended to have effect in England and Wales. According to the latest caravan count figures, nearly 50 per cent. of Gypsies and Travellers who live in caravans in England live on official local authority sites. There are no up-to-date statistics for Wales, but I am glad to note that the recent Niner report on Gypsy and Traveller accommodation needs in Wales, commissioned by the Welsh Assembly Government, has recommended that an up-to-date count be undertaken.
	The time has come to make sure that Gypsy and Traveller occupiers of local authority sites receive the same protection, corresponding to local authority "bricks and mortar" tenants. We must respect their rights to a secure home and family life. The Bill will provide such protection and security, so I commend it to the House.
	 Question put and agreed to.
	Bill ordered to be brought in by Julie Morgan,Mr. David Amess, Ms Karen Buck, Mr. Martin Caton, Harry Cohen, Jeremy Corbyn, Mr. David Drew, Nick Harvey, Kelvin Hopkins, Bob Russell, Mr. Andrew Slaughter and Mrs. Betty Williams.

Mr. Speaker: With this it will be convenient to discuss the following:
	Amendment No. 58, in schedule 20, page 377, line 21, after 'minor', insert '(whether by exercise of trustees' powers under such a will or otherwise).'.
	Amendment No. 56, page 380, line 30, at end insert—
	'(4A) Where—
	(a) section 71 above applied to settled property immediately before 22nd March 2006,
	(b) on or after that date a beneficiary (within the meaning of section 71 above) ("B") became entitled to an interest in possession in that settled property, and
	(c) before that interest in possession had come to an end and while B was under the age of 25 and before [6th April 2008] that settled property became held for the benefit of B on trusts such as are mentioned in subsection (3)(b)(i) above,
	subsections (3) and (4) above shall apply as though the settled property had become held on the trusts referred to in paragraph (c) above immediately at the time B in fact became entitled to the interest in possession referred to in paragraph (b) above.'.
	Government amendment No. 70.
	Amendment No. 34, page 386, line 3, after 'interest', insert ', or
	(d) a relationship breakdown settlement interest.'.
	Government amendments Nos. 71 to 74.
	Amendment No. 59, page 386, line 42, after 'but', insert '(unless B was the spouse or civil partner of the person entitled to the prior interest)'.
	Government amendments Nos. 75 to 77.
	Amendment No. 5, page 388, line 18, at beginning insert—
	'6 (1) In section 89 (trusts for disabled persons)—
	(a) in subsection (4)(a) at end insert—
	"(aa) a person who lacked capacity within the meaning of section 272 below, or";
	(b) in subsection (4)(c), leave out "or middle" and insert "middle or lower"; and
	(c) after subsection (4)(c) at end insert—
	"(d) a person who satisfies the Commissioners for Her Majesty's Revenue and Customs that he had a condition that it was at that time reasonable to expect would have such effects on him as to lead to him becoming a person—
	(i) falling within subsection (4)(a) or (aa) above, or
	(ii) in receipt of an attendance allowance mentioned in subsection (4)(b) above, or
	(iii) in receipt of a disability living allowance mentioned in subsection (4)(c) above.".'.
	Amendment No. 6, page 388, line 29, after '89(4)(a)', insert 'or (aa)'.
	Amendment No. 7, page 388, line 34 , leave out 'or middle' and insert ', middle or lower'.
	Government amendment No. 78.
	Amendment No. 8, page 390, line 26, leave out 'or middle' and insert ', middle or lower'.
	Amendment No. 9, page 390, line 46, leave out 'or middle' and insert ', middle or lower'.
	Amendment No. 10, page 391, line 2, at end insert—
	'(7) The reference in subsection (1) above to a disabled person includes, in relation to any settled property, a reference to a person who satisfied Her Majesty's Revenue and Customs that he would, when the property was transferred into settlement, have been entitled to an attendance allowance or disability living allowance, by virtue of entitlement to the care component at the highest, middle or lower rate, whether or not such an allowance was actually claimed.'.
	Government amendment No. 79.
	Amendment No. 35, page 393, line 9, at end insert ', and
	(iv) not a relationship breakdown settlement interest."'.
	Amendment No. 32, page 393, line 9, after 'interest', insert—
	'10A (1) Section 10 of IHTA 1984 is amended as follows.
	(2) In subsection (1)(b) after "with each other", insert ", or
	(c) it is made in accordance with or pursuant to a court order in proceedings for the following types of provision—
	(i) financial relief for the parties to a marriage and any children of the family in connection with proceedings for divorce, nullity of marriage or judicial separation including, but not limited to, property adjustment orders or variation of settlement orders under section 24 of the Matrimonial Causes Act 1973 or orders under section 8 of the Family Law (Scotland) Act 1985 and any successive legislation; or
	(ii) financial relief for the parties of a civil partnership in connection with proceedings for dissolution of the civil partnership including, but not limited to, property adjustment orders or variation of settlement orders under Schedule 5 of the Civil Partnership Act 2004 and any successive legislation; or
	(iii) where a marriage has been dissolved or annulled or the parties to a marriage have been legally separated, by means of judicial or other proceedings in an overseas country and the divorce, annulment or legal separation is entitled to be recognised as valid in England and Wales, in Scotland or in Northern Ireland, financial relief for the parties to the marriage and any children of the family including, but not limited to, property adjustment orders or variation of settlement orders under section 17 of the Matrimonial and Family Proceedings Act 1984 or orders under section 8 of the Family Law (Scotland) Act 1985 and any successive legislation; or
	(iv) financial relief for the benefit of a child including, but not limited to, a transfer or settlement of property under paragraph 1 of Schedule 1 of the Children Act 1989 and any successive legislation.".'.
	Government amendment No. 80.
	Amendment No. 36, page 396, line 15, at end insert', or
	(c) a relationship breakdown settlement interest."'.
	Amendment No. 37, page 396, line 30, at end insert', or
	(d) a relationship breakdown settlement interest."'.
	Amendment No. 38, page 396, line 39, at end insert', or
	(d) a relationship breakdown settlement interest."'.
	Amendment No. 39, page 397, line 24, at end insert', or
	(c) a relationship breakdown settlement interest."'.
	Amendment No. 40, page 398, line 10, at end insert', or
	(c) a relationship breakdown settlement interest."'.
	Amendment No. 41, page 398, line 28, at end insert', or
	(d) a relationship breakdown settlement interest."'.
	Amendment No. 3, page 398, line 39, at end insert—
	'(2A) After sub-paragraph 1(f) insert—
	"(g) a life protection policy as defined in subsection 4 below;
	(h) property representing directly or indirectly any sum paid under a life protection policy, within two years following the death of any person giving rise to that sum.".'.
	Amendment No. 42, page 399, line 11, at end insert ', and
	(iv) not a relationship breakdown settlement interest.'.
	Amendment No. 4, page 399, line 25, at end insert—
	'(4) After section 58(3) insert—
	"58(4) In subsections 1(g) and 1(h) above a "life protection policy" is a policy of insurance where the sum payable on the death or disability of any person is at all times no less than a number of equal to ten multiplied by the highest total sum of premiums paid in any period of twelve months.".'.
	Amendment No. 43, page 399, line 37, after first 'interest', insert ', or a relationship breakdown settlement interest'.
	Government amendment No. 81.
	Amendment No. 33, page 400, line 6, at end insert—
	'20A In IHTA 1984 after section 59 IHTA 1984 insert—
	"59A Relationship breakdown settlement interest
	(1) Where a person ("L") is beneficially entitled to an interest in possession in settled property, for the purposes of this Chapter that interest is a "relationship breakdown settlement interest" only if the following conditions are satisfied.
	(2) Condition 1 is that the settlement was effected, or if there was a prior settlement it was confirmed or varied, by a court order, in proceedings of the type mentioned in section 10(1)(c).
	(3) Condition 2 is that L became beneficially entitled to the interest in possession on or before the date on which the court order came into effect.'.
	Government amendment No. 82.
	Amendment No. 57, page 400, line 44, at end insert 'or a disabled person's interest'.
	Government amendment No. 83.
	Amendment No. 44, page 401, line 21 , after 'interest', insert ', or
	(iii) a relationship breakdown settlement interest.'.
	Government amendment No. 84.
	Amendment No. 45, page 401, line 27, after second 'interest', insert 'or a relationship breakdown settlement interest'.
	Government amendment No. 85.
	Amendment No. 46, page 401, line 30 , after 'interest', insert 'or a relationship breakdown settlement interest'.
	Government amendment No. 86.
	Amendment No. 47, page 401, line 37 , leave out 'neither' and insert 'not'.
	Government amendment No. 87.
	Amendment No. 48, page 401, line 37, leave out 'nor' and insert 'or'.
	Amendment No. 49, page 401, line 38 , after 'interest', insert 'or a relationship breakdown settlement interest.'.
	Amendment No. 50, page 402, line 2, at end insert', or
	(d) a relationship breakdown settlement interest."'.
	Amendment No. 54, page 403, leave out line 1.
	Amendment No. 55, page 403, line 2 , leave out 'the' and insert 'a'.
	Government amendments Nos. 88 and 89.
	Amendment No. 11, page 403, line 26, at end insert—
	'"lacked capacity" means lacked capacity, within the meaning of the Mental Capacity Act 2005, in relation to any financial matter;'.
	Amendment No. 51, page 403, line 26, at end insert—
	'"relationship breakdown settlement interest" means a relationship breakdown settlement interest for the purposes of Chapter 3 of Part 3 (see section 59A above);"'.
	Government amendments Nos. 90 to 92.
	Amendment No. 12, page 404, line 6, at end insert—
	'(iii) a disabled person's interest, within the meaning given by section 89B of that Act; or'.
	Amendment No. 52, page 404, line 6, at end insert—
	'(iii) a relationship breakdown settlement interest within the meaning given by section 59A of that Act, or'.
	Government amendments Nos. 93 to 96.
	Amendment No. 53, page 405, line 5, after 'interest', insert 'or
	(iii) a relationship breakdown settlement interest.'.

Theresa Villiers: From the day the Chancellor slipped out these proposals contained in schedule 20 of the Finance Bill in Budget note 25 on 22 March this year, they were greeted with dismay and viewed as a matter of grave concern. Protests came from thousands of professionals across the country who were deeply worried that the Government had failed to carry out any consultation on the proposals and that those proposals would have a retrospective impact on thousands of trusts. Above all, Richard Platt, of Brewin Dolphin Securities, spoke for many of similar mind when he said that the proposals would
	"hit Britain's hard-working families at a time when the Government is encouraging families to safeguard their long-term financial security."
	The Society of Trust and Estate Practitioners, which has campaigned hard on the issue, estimated that at least 1 million wills would have to be reviewed or rewritten. The VAT on the £250 million or so of professional fees incurred in reviewing all those wills would have outstripped the mere £15 million that the Government expected to raise from what must have been one of the least cost-effective tax proposals ever made.
	The Paymaster General dismissed the measured concerns that I expressed about these matters on the Floor of the House by saying that I did not know what I was talking about. Despite that robust defence, in Committee the Government then proceeded to table no fewer than 33 amendments to schedule 20 in an attempt to mitigate the serious problems about which I and so many others had protested.
	The key changes were to reduce the new tax penalty imposed on trusts where property does not vest until the age of 25, and to restore the spouse exemption for trusts set up in wills. The Chancellor's retreat continues today, with another 27 Government amendments to schedule 20. I welcome Government amendmentNo. 75 in particular, which more or less completes the Government's U-turn on the spouse exemption and covers the point made in our amendment No. 59. The Government dismissed my arguments on the point in Committee, but they seem now to have conceded that successive life interest for spouses should not always fall under the new regime set out in schedule 20.

Rob Marris: I declare an interest in that I used to work for Thompson's personal injury solicitors, who give money to my constituency Labour party. I point out to the hon. Lady that under her amendments some personal injury victims would get a windfall. When their awards were calculated the then tax regime would have been taken into account, and if she then ameliorated the tax regime, those individual would get a windfall. Secondly, the Government are, rightly, encouraging PI victims with large settlements to take them as a series of staged payments, to put it in the vernacular, rather than in one large lump sum.

Theresa Villiers: The point is that the courts have not taken the new tax regime into account. The changes will impact on existing trusts, so, far from a windfall, there will be a tax penalty. Even if the courts had been sharp enough to say, "We will look at what is in the Finance Bill and start tailoring compensation awards accordingly," how are they supposed to know how the legislation will turn out? Only two days ago, the Government were still tabling amendments. They have tabled 50 amendments to schedule 20. It is completely impossible for any court in a PI case to have tailored its settlement to take into account the current tax regime because, quite frankly, no one knows what it is. The hon. Gentleman may shake his head, but he knows that that is a valid point.  [Interruption.] Indeed, the Government have been making it up as they go along.
	That brings me neatly to insurance, and a prime example of how the Government have been making it up as they go along. It has been a problem for them ever since they slipped out Budget note 25. They simply did not think through the impact of schedule 20 on millions of people who hold life insurance policies in trust. Writing insurance policies into trust has been considered best practice for many years because it means that money can be paid out to the family swiftly in the event of tragedy, without lengthy delays waiting for a grant of probate. It also means that it is simple and easy to change the beneficiaries under a policy to take account of changing family circumstances.
	Data from the Association of British Insurers suggest that there are 22.5 million single premium and regular premium life policies in force, and anecdotal evidence indicates that about 20 per cent. are written in trust. The ABI estimated that about 4.5 million policies may have to be reviewed as a result of schedule 20. The families affected would be faced, at worst, with the threat of a punitive new tax bill, and at best with the need to review and amend their policies. Prudential and Standard Life both suspended the sale of life policies under trust because of the uncertainty surrounding the Finance Bill.
	Initially, the Government's reaction was denial. They denied that there was a problem. They issued a guidance note and dismissed the furore as scaremongering. However, following the Bill's publication, it was clear that there was no specific exclusion for life policies. Kevin Martin, the Law Society president, confirmed that millions of life policies would still be caught. Julie Hutchinson of Standard Life expressed the concerns of many when she said:
	"We're extremely disappointed that the clear statements in the guidance note are not carried into effect in the bill itself and will be making further representations via the ABI on this retrospective effect issue".
	The concerns that I set out on Second Reading were brushed aside, then a few weeks later, in Committee, the Government suddenly tabled a set of deeply obscure and complex amendments. Although I welcome the Government's change of heart on that, as on so many other aspects of schedule 20, a number of serious problems remain. As Colin Jelly of Skandia Life pointed out, the Government's amendments in Committee were only a small, albeit a welcome, step in the right direction. He said:
	"A significant number of people are still likely to be affected by the changes and the government is doing nothing more than tinkering at the edges of the proposed legislation."
	The carve-out introduced by the Government in Committee does not cover all pre-Budget day policies. It therefore contravenes the Treasury's guidance note of 7 April and the statement made to the House by the then Chief Secretary on Second Reading that
	"no one who wrote a life insurance policy in trust before Budget day will have to pay a new inheritance tax charge as a result of these changes."—[ Official Report, 24 April 2006; Vol. 445,c. 369.]
	This statement is still not true. The new charges will still apply to pre-Budget day policies where there is a change of beneficiaries, except where that change results from death. If, for example, a new baby is added to a policy, that will amount to a new settlement and will trigger the new, penal schedule 20 regime. Furthermore, where an interest in possession is removed from someone who remains a beneficiary, the new reservation of benefit rules in paragraph 33 of the schedule mean that the trust could be liable for a 40 per cent. inheritance tax charge on the death of the former life tenant.
	Because of those gaps in the protection provided by the Government amendments that were made in Committee, substantial numbers of people—perhaps millions—will have to review their policies. Even more worryingly, the Government's climbdown in Committee does nothing to assist life insurance policies written into trust after Budget day, all of which will be subject to the new regime and charges. Having originally thought that no policies would be affected at all, the Government appear to be happy that some policies will be caught by the new charges from now on. Almost by accident, they have proposed to introduce significant new taxes on life insurance policies that will operate in an arbitrary way when the 6 per cent. charge is levied on the 10-year anniversary of the trust.

Dawn Primarolo: But does the hon. Lady agreewith her hon. Friend the Member for Macclesfield(Sir Nicholas Winterton) that inheritance tax should be abolished—yes or no?

Theresa Villiers: That would indeed be a highly desirable result and the Government still have the opportunity to do that if they so wish. I certainly hope that they do. This is the Minister's last chance to save divorcing couples and people in a civil partnership facing relationship breakdown from an unwelcome new tax charge, and I hope that she will seize that opportunity.
	The Government went badly wrong with schedule 20. Their preconceptions about trusts and the people who use them were fraught with misunderstanding and, frankly, with prejudice. The Star Group of solicitors, expert in the field of trusts, points out the simple truth that has somehow eluded the Government, that
	"trusts are very often set up for reasons that are nothing whatever to do with tax...they are widely used to prevent families' assets from being squandered...to protect individuals from themselves or others"
	and to maintain family harmony.
	The Government have failed to produce any empirical evidence of the widespread use of trusts for avoidance purposes, apart from bare assertions and a couple of theoretical examples. Nor have they responded to the direct request of the Treasury Committee to provide evidence for their assertion that only a minority of a minority of 100,000 discretionary trusts would be affected by schedule 20.
	The Government may have U-turned on a number of hugely important points, but schedule 20 still imposes new taxes on thrift, prudence and responsible behaviour, on the sick and the dying, on divorce, and on the mentally ill and disabled.
	I close by quoting from an e-mail that I received just a few days ago that illustrates the high human cost of this whole debacle. It reads:
	"My father was seriously ill earlier this year. His will is in favour of his 6 grandchildren and contains a trust with the age set at 25...Because of the Finance Bill, I had to arrange for his solicitor and both executors"—
	to see him—
	"so he could say whether he wanted them to maintain 25 or pay the penalty or revert to 18. So there he was lying in bed coughing up a lung, 88 years old...terrified of dying, and I had to explain all this. He cried for a couple of days after from distress. How many others I wonder have had to do"—
	the same?

Julia Goldsworthy: Of course I am not suggesting that those amendments should not have been tabled. However, it is unprecedented that we have this many amendments, which would significantly alter the sense of the measure. Great uncertainty has been expressed by many professional bodies.
	Government amendment No. 70 deals with an issue that I raised in Committee on the part of schedule 20 that deals with trusts for bereaved minors. In Committee, I raised concerns about the Bill as it then stood, which allowed favourable treatment in respect of inheritance tax for bereaved minors, but only if the trusts in question were set up by a parent. Government amendments made in Committee resulted in the measure being extended to include step-parents. However, minors whose legal guardians were not their parents or step-parents would have been very vulnerable because they would not be provided for under the measures. The amendment deals with that problem. It extends the provisions to all those who have parental responsibility under the Children Act 1989 for England and Wales, the Children (Scotland) Act 1995 for Scotland, and the Children (Northern Ireland) Order 1995 for Northern Ireland. Although the conclusion on this has probably not been reached in the most efficient manner, the result is a vast improvement on the original proposal, so we will support it.
	I now come to Opposition amendments relating to bereaved minors. My understanding of amendment No. 58 is that it would create a situation in which the trustees of the will of a parent of a bereaved minor could set up a trust for the benefit of the minor. I support the amendment, as it offers further safeguards for those very vulnerable young people.
	There are several Government and official Opposition amendments that address questions that remained following debates in Committee on transitional serial interest, but, fundamentally, the Government amendments do the job. Government amendments Nos. 74 and 75 set out that serial interest can be extended beyond 2008, but only when the spouse succeeds upon death. That was the only real area in which spouse exemption remained in some doubt. There would be some existing pre-22 March 2006 life interest trusts for one spouse to provide for the other spouse to take a successive life interest after their death. If the schedule were left as originally drafted, it would have overwritten that spouse exemption if the life interest was passed on after 2008.
	I want to raise a question with the Paymaster General about the difference between the Government and Opposition amendments. Opposition amendment No. 59 would extend the scope laid out by the Government amendment to outside death by also applying to situations in life. Why did the Government decide to make the provision applicable only on death, but not in life?
	Concerns have continued to be raised about how narrowly drawn are the restrictions surrounding the eligibility to fall within the proposals for disabled trusts. Although Government amendments Nos. 80 to 85 ensure that disabled life interest trusts will not be affected by the changes made to the inheritance tax treatment of other life interest trusts, concerns remain about how narrowly drawn are the definitions of "disabled". Liberal Democrat Members have supported a series of Opposition amendments that have tried to draw definitions in more modern terms that reflect more recent legislation on this issue.
	As things currently stand, the definitions of disability are out of date, so many people who today are classified as disabled will be excluded under the Bill. Organisations such as Mind have been working with the Low Incomes Tax Reform Group to help to overcome these problems. I understand that the LITRG helped to draft amendments Nos. 5 to 12. The amendments would help to address those concerns, so I will support them. Among such organisations' primary concerns are individuals with fluctuating conditions, such as manic depression and schizophrenia, and also people with some physical disabilities, such as multiple sclerosis. They were keen to impress that all disabled persons should not be exempt, but that the proposals in their current form would mean that those who could not cope with a large inheritance or gift could still fall outside the regime. They therefore strongly believed—I support them on this—that reference to the Mental Capacity Act 2005 would be better able to capture the issue regarding capacity, because it is able to capture partial capacity. There could be someone with a physical disability. That person may have no problem in managing their financial affairs or vice versa. That is why amendment No. 11 points to a definition of capacity in terms of lacking capacity
	"within the meaning of the Mental Capacity Act 2005, in relation to any financial matter".
	The terms of the Act are flexible enough to include definitions of partial capacity.
	The amendments allow for greater flexibility in the creation of trusts. At present, only the affected individual can self-settle if they have a condition that they expect will lead to disability. If they are already ill, someone can create a settlement for them. Those who expect to become unwell or have a fluctuating condition have to self-settle. Amendment No. 5 allows for others to set up similar self-settlement trusts. The wider amendments bring in the 2005 Act for a lower level of severity and then will enable someone who expects to be unwell to have a settlement created for them.

Dawn Primarolo: I have already heard that point from the hon. Member for Chipping Barnet(Mrs. Villiers), who was lobbied by the same people as the hon. Member for Falmouth and Camborne (Julia Goldsworthy). However, there is an alternative, because a charge could be taken on the property, so it is simply not true that it cannot be done. Those who have been unfortunate enough to go through divorce know that the normal procedure, if a clean break cannot be made, is that a charge is taken on the property.

Rob Marris: Earlier, the right hon. Gentleman quoted from the explanatory notes to clause 157. If he read on—I am sure that he did—he would realise that they continued:
	"So far as new trusts are concerned... it continues the current special treatment for 'interest-in-possession' trusts created on intestacy and straightforward interest in possession trusts created by will; and for 'accumulation and maintenance trusts' to trusts created on the death of a parent where beneficiaries will take the trust assets at age 18."
	Although the right hon. Gentleman may argue—incorrectly, in my view—that the Government are attacking specific groups, he is wrong about the recently bereaved.

John Redwood: Although the Government have moved somewhat to protect vulnerable groups in specific circumstances, the protection is not comprehensive. There will be hard cases and difficulties if all we do today is accept the Government amendments. The simplest way to protect vulnerable people is not to proceed in that direction. We therefore revert to the fundamental questions. What is the purpose of the provisions? How much money is at stake? Are the Government sure that they will capture a few rich people who use the current system unreasonably, in their view, while not capturing many others? We have learned that those others perhaps include the hon. Member for Falmouth and Camborne (Julia Goldsworthy), who imprudently took out a life protection policy without knowing what her tax position would be. Wallowing in ignorance in that way, with one's money at risk under the very measure that one is trying to amend or improve, is not a good advert for Liberal Democrat advice on financial planning. Obviously, the hon. Lady has a lot to learn in all sorts of ways as she trains on the job of speaking to the difficult set of clauses and schedules before us.
	Those on the Treasury Bench find themselves in some difficulty over these measures. I do not think that they have a great deal of enthusiasm for the job in hand; I do not see them leaping to their feet to say that this is the best thing that they have ever done. I do not suppose that they will include in their leaflets to their constituents the fact that they are proud to have done considerable damage to the trust regime for those who are divorcing. Nor am I sure that that will be the leading subject in their election leaflets when we get to the next general election. They will not be saying, "I have great news, o electors! The Labour party has managed to make your divorce even more painful and to secure even more money for the Treasury rather than for you."

Philip Dunne: I am extremely honoured to followthat highly entertaining and thought-provoking contribution from my right hon. Friend the Member for Wokingham (Mr. Redwood). I rise to discuss some of the issues on schedule 20 that were picked up in Committee, and I should like to start with the Government's two-and-a-half-year consultation period on the modernisation of the trust regime, during which the age reduction for accumulation and maintenance trusts from 25 to 18, as proposed in the schedule, was not raised.

Stewart Hosie: There was a great deal of uncertainty when the Bill was published and when it began its progress in Committee. The large number of amendments that were supported by hon. Members of all parties is testament to that, and some of the uncertainty remains. I hope that it will be fixed by the Government amendments and others as we progress. I am particularly pleased with Government amendment No. 70, which brings those with parental responsibility into play in the same way that birth parents are in respect of trusts. We discussed that issue in Committee and I am delighted that the Government have taken it into account.
	I shall not re-summarise all the briefing notes that others have mentioned—we have all read them anyway—but I shall make one or two specific points. It is important to discuss vulnerable people and I am not at all convinced that the definition of such people is sufficient. It is too narrow and some vulnerable people clearly fall outside the specified disability living allowance category. I would like to bring to theHouse's attention a letter from a small solicitor firm,J W Hughes and Co. from Llandudno, which was given to me by my hon. Friend the Member for Meirionnydd Nant Conwy (Mr. Llwyd). The letter makes that very point—that some vulnerable people fall outwith that definition. The concern was expressed by a small county lawyer with no political axe to grind.
	It is interesting that other lawyers have approached me about other issues. Even as the amendments were being progressed and more information was emerging about the shape of the Bill, there remained a great deal of concern about the number of wills that would have to be changed as a result of insurance and other policies being written into trusts in the wills. Another local solicitor—a small, county solicitor based near my constituency—advised me that his business has some 18,000 to 19,000 wills under management and that in his best assessment about 40 or 50 per cent. of them would need to be changed. Unfortunately, it is not certain which 40 or 50 per cent. will require it. It may be based on a misunderstanding that the changes will impact only on trusts and funds that breach the inheritance tax threshold. None the less, I ask the Paymaster General to concentrate on the issue of vulnerable people and how they will be looked after under the new regime. She should also focus on the inheritance tax threshold with particular regard to the great fears of many people and many law firms about the potential for hundreds, thousands or millions of wills having to be changed.

John Redwood: My hon. Friend is the only person to have supplied a figure. As he rightly reminds us,£15 million was the first year forecast. Has he any thoughts about how much of that £15 million will be given back by the 27 Treasury amendments tabled for that purpose today?

Brooks Newmark: I will try to be brief and, rather than rehashing the points that we made in Committee, I merely wish to seek clarification from the Paymaster General on several points that she made, particularly with respect to amendment No. 5. In Committee, she admitted:
	"For people who find it difficult or impossible to cope with the demands of owning assets outright, a trust will often be the most practical way for substantial assets to be held."
	However, what about people who find it difficult or impossible to cope with the demand of owning assets because of drugs, alcohol or gambling—the very point raised by my hon. Friend the Member for Chipping Barnet (Mrs. Villiers)?
	The Paymaster General made three technical and non-substantive objections to amendment No. 5, which deals with the definition of disability—a point madeby my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke). The first was that the new definition would conflict with trusts already in existence. The second was that the Mental Capacity Act 2005 is not yet in force. The third was that it applies only to England and Wales. Can the Paymaster General confirm whether she objects to the wider definition of vulnerability itself, or is she merely shying away from the technical difficulties?
	The Paymaster General said:
	"While I sympathise with the desire to keep the tax code up to date with developments in non-tax legislation, I do not consider that those particular changes would really improve matters."
	Is she acknowledging that matters need improving? If so, how does the legislation improve the situation faced by vulnerable people?
	The Paymaster General further said:
	"I can see the desired effect of the changes proposed by the hon. Member for Chipping Barnet, the route she suggests would be a difficult one to take at this point."—[ Official Report, Standing Committee A, 13 June 2006; c. 613-15.]
	If the Paymaster General can see the desired effect, why can she not see another route? I look forward to her response to those questions.

Rob Marris: Some of the points made by the Opposition have been valid and have been accepted by the Government. I wait with great interest to hear what my right hon. Friend the Paymaster General says about disability. The definition of disability, as I understand it, is not woolly. The hon. Member for Braintree(Mr. Newmark) may disagree with it. I quite understand that. He said that he disagreed with it. But it is not woolly. It may not be the right definition from his point of view, but it is precise.
	The right hon. Member for Wokingham(Mr. Redwood) kindly accepted an intervention in which I read from the explanatory notes. My point was that that was, in a sense, a statement of aim by the Government as to what they hoped to achieve with schedule 20. Because it was an intervention, I did not carry on and read a large part of what followed, but, with your indulgence Mr. Deputy Speaker, I will now read a little more from the explanatory notes to clause 157 and schedule 20. After the piece that I read out, which ended at "assets at age 18", the notes state:
	"Trusts for 'disabled persons' will also continue to enjoy special treatment."
	That was a statement of aim by the Government. There were problems and the Government listened to some of those criticisms—hence the Government amendments before us today, which I hope that my right hon. Friend the Paymaster General will explain.
	I have had the pleasure of serving on five Finance Bill Standing Committees in my time in Parliament—there are hon. Members, and particularly right hon. Members, who have served on a great many more—and I suspect that a similar kind of procedure, on occasions, unfolded when the Conservatives were in government. Whether in the explanatory notes, or a Budget statement, or a Budget press release, there was a statement of what a particular series of measures embodied in a Finance Bill were intended to achieve. Then experts came along—whether it was Mrs. Gauke or the Chartered Institute of Taxation—and said, "Leaving aside for a minute whether we agree with that statement of purpose or aim, what you have put in your Finance Bill does not embody that and will not get you where you say that you wish to go."
	In terms of the debate in Committee and here today on where the Government wish to go with these trusts and the change in the tax regimes for them, the Government have listened. On some of the more technical aspects, they have said: "We set out clearly where we wished to go. We set out the clauses and the schedule in the Finance Bill by which we wished to achieve that goal. We have not technically always got it right. We have listened to those technical criticisms and we have tabled amendments that are in front of the House this evening—they are likely, in the nature of things to be passed—that will deal with those technical deficiencies." I see that as a positive endorsement of the parliamentary process and of the way in which the Treasury and its Ministers listen—perhaps more than some right hon. and hon. Members give them credit for—to arguments and proposals made both by outside organisations and, within debate, by Members on both sides of the House. I applaud what the Government have done. They have listened.
	As I understand the Government amendments—I am not a huge expert on them—they will get the Government much closer to the goal that they and I have. That goal is to clamp down on tax avoidance in certain areas, but still allow "special treatment"—to use the words from the explanatory notes—in the particular areas to which the explanatory notes refer. Those are sensitive areas in human terms and judging from the debate, all hon. Members broadly support them. I am talking about looking after individuals who have disabilities, whether or not they are minors, following the death of those who care for them and about broadening the definition of those who care for them, and also about looking after those, whether or not they have disabilities, who are minors when they are bereaved. I applaud what the Government have tried to do. As far as I can tell, they have got it right.

Dawn Primarolo: The forecast in the Budget will remain the same if and when the Government amendments are made. The right hon. Gentleman has a great deal of experience, so he will know that work can be drummed up for lawyers and accountants in many ways including, regrettably, the use of scare tactics.
	I shall deal briefly with the Government amendments in this group, which make the technical changes necessary to correct errors in the drafting of the Bill, before turning to the Opposition amendments. Government amendments Nos. 78 to 81 and 83 to 87 make minor technical changes to the operation of the rules for trusts for disabled persons and trusts established by someone who expects to become disabled in future. I hope that they will all be welcomed. Government amendment No. 78 makes provision for an interest in possession—IIP—for a disabled person to qualify as a disabled person's interest when the property was put into a trust before 22 March 2006 but the disabled person only became beneficially entitled to it on or after that date. Without the amendment, that treatment would be available only to property put into trust on or after 21 March 2006.
	Government amendment No. 79 is a drafting amendment to ensure that no inheritance tax arises when someone with a condition that is expected to lead to a disability settles property on themselves. Some Members have asked whether the existing provision risks a double charge, but the amendment makes it completely clear that such a settlement is not treated as a potentially exempt transfer. Government amendment No. 80 extends the rules in schedule 20 that apply when an IIP ends on or after 22 March 2006 to IIPs of which a disabled person is the beneficiary. Government amendment No. 81 deals with the rules in section 59 of the Inheritance Tax Act 1984—IHTA—that exclude a qualifying IIP from the inheritance tax charges on a relevant property. It modifies the definition concerning a company that is beneficially entitled to an IIP to include interests that were previously disabled persons' interests. Government amendments Nos. 83 to 87 modify section 88 of the IHTA so that special treatment given to pre-22 March 2006 protective trusts is available, too, to trusts created on or after 22 March 2006, where the underlying interest is a disabled person's interest.
	Schedule 20 makes arrangements for IIP trusts set up before 22 March 2006, and Government amendment No. 75 is the core amendment in a series dealing with the transitional serial interest. It provides that a pre-Budget IIP to which someone becomes entitled on the death of their spouse or civil partner on or after 6 April 2008 will qualify as a transitional serial interest, and thus continue to be treated as owned by the surviving spouse or civil partner for inheritance tax purposes. Government amendments Nos. 71 to 74 restructure the existing provisions dealing with transitional serial interests in the light of that change, while Government amendments Nos. 76 and 77 make consequential changes elsewhere in schedule 20.
	The hon. Member for Chipping Barnet (Mrs. Villiers) made a similar point in Committee, although the amendments that she tabled did not address the precise issue that we have tackled. Opposition amendment No. 59 returns to the matter and would enable the benefit under the trust to be passed between spouses and civil partners while they are both living. The Government amendments, however, provide that that can happen only as a result of the death of one partner. The Opposition's approach is open to exploitation through the use of lifetime transfers, so I cannot accept it. Nevertheless, I hope the hon. Lady will agree that the Government's amendments address the core concerns in this area, and I hope that she will support them.
	Government amendment No. 82 is a minor correction to the transitional serial interest rules which provides for disabled person's interests created for the settlor or their spouse to be disregarded when charging other trusts created by the same settlor. Opposition amendment No. 57 covers similar ground, but I am advised that there is a technical reason why it fails to hit the right target. Given the technicality of the subject, I hope the hon. Lady will agree that her amendment is not necessary. I assure the House that my officials will be happy to discuss the details with interested parties if necessary. The matter was debated at some length in Committee, and the hon. Lady and I agreed that it needed further consideration. I hope she will acknowledge that that has taken place.
	Government amendment No. 70 deals with who should be able to set up a trust for a bereaved minor. That returns to the point that the hon. Members for Falmouth and Camborne (Julia Goldsworthy) and for Dundee, East (Stewart Hosie) raised in Committee regarding legal guardians being able to set up trusts for bereaved minors. As I mentioned then, people other than parents can still set up such trusts. All that schedule 20 does is apply tax charges to amounts in excess of the £285,000 which is the current inheritance tax threshold. I asked my officials to consider whether a wider definition of "parent" could safely be put within the scope of schedule 20, and to examine the technical and legal difficulties associated with guardianships and the various definitions.
	Government amendment No. 70 deals with that point. It extends the meaning of "parent" for these purposes to cover individuals who, immediately before they died, had parental responsibility for a child under the relevant legislation for England, Wales and Northern Ireland. For Scotland, the amendment refers to parental responsibilities under Scottish law. I am informed that the amendment provides the security that will allow the provision to operate. That means that anyone with parental responsibility will be able to create trusts that are exempt from IHT charges in the event of their death, in exactly the same way as parents can. I hope that hon. Members will welcome the change. I am grateful to those who raised the matter and debated it in such a constructive way in Committee.
	Government amendments Nos. 90 to 96 deal with consequential changes to the capital gains tax regime. Amendment No. 93 alters a Taxation of Chargeable Gains Act 1992 reference, and amendment No. 96 extends holdover relief to property leaving age 18-to-25 trusts when the beneficiary attains or is under the age of 18.
	Government amendments Nos. 88 and 89 make a small change to the way in which the new rules interact with section 144 of the Inheritance Tax Act. Amendment No. 89 allows a two-year period in which a will can effectively be rewritten to cover deaths that took place before Budget day, but where the rewriting takes place after Budget day. Amendment No. 88 is a straightforward drafting correction. In Committee the hon. Member for Chipping Barnet tabled amendments with a similar intention. She will recall that I noted at the time that the Opposition amendments were technically deficient, but I undertook to give the matter further consideration. I have done that. The hon. Lady has returned to the same point in her amendmentsNos. 54 and 55, but I hope she will accept that the Government amendments deal with the point.
	New clause 2, the consequential amendments and the Opposition amendments to schedule 20 are simply not necessary. New clause 2 seems to be intended to carve out special IHT treatment for trusts that are set up on divorce in relation to life insurance protection policies and for some disabled people. It starts by saying:
	"The provisions of Schedule 20 shall not operate so as to discourage, impede or prevent the use of trusts which are set up"—
	for those purposes. That begs the question of who would judge whether the test was satisfied. There is no justification for special treatment for life insurance protection policies. The Government are not denying that insurance is important, we are merely saying that this particular asset does not require special provision in the tax regime for trusts.
	Secondly, on relationship breakdown settlements, I can only repeat what I have said on previous occasions. HMRC is advised that trusts are rarely used in divorce cases, and their use is certainly not necessary. There has been some discussion of that this afternoon. Where they are used, the balance will often have been tipped by the additional IHT advantages that a trust can bring. I referred at the beginning of my remarks to the importance of tax neutrality as one of the issues that the Government were addressing here in relation to trusts.

Theresa Villiers: On life insurance trusts, does the right hon. Lady stand by the statement made clearly in the guidelines issued by the Treasury on 7 April, and by the then Chief Secretary on Second Reading that no life insurance policies written in trust before 22 March will be affected by schedule 20 charges—not one?

Dawn Primarolo: Yes, some did, and I shall go on to make the points for the hon. Lady. This is a difficult area of legislation and there is not unanimity among all the groups. I concede that point, and I have always conceded it. We are concerned with the majority. If the Government undertake a consultation and refuse to go with the majority on the basis that some now have a different view, or at the time had a different view, it makes it impossible to deal with any legislation inthis area. The Department undertook extensive consultation with charities and groups representing the disabled when arriving at the definition of disability for income tax and capital gains tax purposes.

Theresa Villiers: I thank Members for their contributions, and I emphasise that my party is not asking for special tax privileges for trusts. All we are saying is that the Government should not slap punitive new tax charges on trusts, the vast majority of which are set up for completely non tax-related reasons. They are set up to provide for family members—to provide security for families for the future—and we oppose the charges because they are an attack on prudent and responsible behaviour.
	The Paymaster General persists with the misleading statement that the Government seek to align the tax treatment of trusts with mainstream treatment. That is simply not true; they seek to bring all trusts within the punitive regime that has existed for many years for discretionary trusts. The tax regime does not currently give special tax privileges for trusts; that is why they are not largely used for tax avoidance. We deny that we are seeking special privileges for trusts; we just wish to oppose the Government's punitive new charges in this area.
	The Paymaster General believed that there was no problem in relation to people changing their wills, and that few people would be affected. In that case, why has she tabled 50 amendments to her own schedule? The Paymaster General seemed to regret that I have made the same speech on a few occasions. The last time I made the speech it seemed to have an impact, because the Government promptly did what I asked them to do three weeks later through amendments in Committee.
	The Paymaster General gave a long list of organisations that apparently support her position on the disability consultation, but they patently do not. I have given the House an example of an organisation that she listed but which expressed grave concern about the definition in question. It is my understanding that only six organisations that represent disabled groups responded to the consultation on this point and, as I have told the House, they expressed concerns.
	The Paymaster General says that they cannot adopt the Opposition's amendments because the Mental Capacity Act 2005 has not yet come into effect. That is no barrier. We can incorporate a provision in that Act, even though it has not yet come into effect. If we incorporate it into the Inheritance Tax Act 1984 as a result of this Finance Bill it can happily take effect from the moment of Royal Assent.
	The Paymaster General says that there is no justification for introducing special treatment for life insurance policies. Why then did she table amendments in Committee to give special treatment to life insurance policies? She also refused to answer my question about whether the then Chief Secretary was correct in saying to the House that no life insurance written into trust before Budget day would be affected by the schedule 20 changes. She refused to answer that question because that statement was not true then and is not true now.
	The Paymaster General brushed aside my concerns about divorce by saying, "You don't need trusts in divorce, as plenty of other mechanisms are available." Frankly, those mechanisms are not available to people whose divorces are already concluded. They might have trusts already, and now, thanks to the Paymaster General, they face the deeply unpleasant prospect—both financially and emotionally—of going back to court to have their divorce settlements varied to try to resist the Government's attempt to place new tax charges on divorce.
	The Paymaster General also refused to be drawn on other alternatives on offer that perform a similar function to a trust in relation to a divorce—I acknowledge that—such as a charge or retaining legal ownership. Both those will involve a new tax charge, whether that is an additional income tax charge or a capital gains tax charge. In either case, unless the Opposition amendments are agreed to, there is the prospect that people who get divorced and wish to allow their spouse to live in a property until their children have completed their education will be paying new taxes, thanks to schedule 20.
	We have emphasised throughout the debate the huge value that trusts provide to ordinary hard-working families. The Government's proposals will hit not just the super-rich, but a whole range of people who have done nothing more criminal or irresponsible than to try to provide financial security for their families' future, which is why I will press new clause 2 to a Division.

The House divided: Ayes 223, Noes 277.

Madam Deputy Speaker: With this it will be convenient to discuss the following:
	New clause 7— Dependant's Retirement Income Fund—
	'(1) The Finance Act 2004 is amended as follows:
	(2) In Schedule 28 after paragraph 22 insert—
	"22A Dependant's retirement income fund
	(1) Subject to subsections (2) and (3) of this section, a department's retirement income fund is a vehicle for the reinvestment of savings in reitrement, which—
	(a) has been established by a person designated by subsection (1) of section 154; and
	(i) investments of a kind described in the Insurance Companies Regulations 1994, Schedule X, Part 1; or
	(ii) approved by HM Revenue and Customs.
	(2) Funds held in the retirement income fund as referred to in subsection (1) may be withdrawn from the retirement income fund by the members as and when he elects.
	(3) A dependant may not invest in a dependant's retirement income fund unless the requirements of Rule 8 of section 165 have been met.
	(4) A retirement income fund, and any income derived from it, must not be capable of assignment or surrender by the member.
	(5) Any withdrawal from the fund by the member under subsection (2) shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and shall be treated as earned income of the member.".'.
	Amendment No. 62, in clause 159, page 135, line 7 , leave out 'and (4)' and insert ', (4) and (7)'.
	Amendment No. 14, page 135, line 34, at end insert—
	'(7) The Treasury may make regulations about the application of subparagraph (2) of this section which will be deemed to take effect from 6th April 2006.'.
	Amendment No. 107, schedule 22, in page 451, line 26, after 'fund', insert 'and retirement income fund'.
	Amendment No. 108, page 451, line 28, after 'fund', insert 'and retirement income fund'.
	Amendment No. 109, page 451, line 38, after 'fund', insert 'and retirement income fund'.
	Amendment No. 110, page 452, line 6, after 'pension', insert 'and retirement income fund'.
	Amendment No. 111, page 452, line 29, after 'fund', insert 'and retirement income fund'.
	Amendment No. 112, page 452, line 35, after 'fund', insert 'and retirement income fund'.
	Amendment No. 113, page 452, line 40, after 'fund', insert 'and retirement income fund'.
	Amendment No. 114, page 453, line 4, after 'fund', insert 'and retirement income fund'.
	Amendment No. 115, page 453, line 10, after 'fund', insert 'and retirement income fund'.
	Amendment No. 116, page 453, line 29, at end insert—
	"dependent's retirement income fund" has the meaning given by paragraph 22A of that Schedule'.
	Amendment No. 117, page 453, line 40, at end insert—
	"'retirement income fund" has the same meaning as in paragraph 16D of that Schedule.'.
	Amendment No. 118, page 453, line 44, after 'fund', insert 'and retirement income fund'.
	Amendment No. 119, page 454, line 6, after 'fund', insert 'and retirement income fund'.
	Amendment No. 120, page 454, line 20, at end insert—
	"'dependant's retirement income fund" has the meaning given by paragraph 22A of that Schedule'.
	Government amendments Nos. 31 and 97

Mark Hoban: I shall not do that, despite the hon. Gentleman's tempting me to do so. However, the rules have an important bearing on some points that I want to make.
	It is fundamental to appreciate that, in the 2004 Act, the Government accepted that there is no requirement for the annuitisation of the pension fund of a group of people at 75. Anyone who wants to go down that route can do so. The Government have, therefore, through the 2004 Act, removed an argument for compulsory annuitisation.
	The new clause creates an alternative to the alternatively secured pension, which sets a maximum draw-down that ensures that people do not run out of funds during their retirement. It would minimise the chances of those with alternatively secured pensions becoming reliant on the state. It would not entirely prevent that but it would minimise the chances by ensuring that there was always something left in the alternatively secured pension on which people could draw later in life.
	The new clause would also minimise the chances of people becoming reliant on the state by requiring them to buy an annuity that delivered a minimum income. The Chancellor of the Exchequer would set the amount and, once it was purchased, it would enable people to draw down the rest of the funds as they saw fit, as they can do now before the age of 75. The new clause therefore sets out the minimum income requirement, the amount of which would be set by the Chancellor annually, to ensure that people do not become reliant on the state in their retirement, but that they have the flexibility to determine how the remainder of their pension fund should be used.

Steve Webb: The hon. Gentleman has given a clear exposition. He suggests that the Chancellor of the Exchequer would set the same minimum income figure for everybody. However, if I have a pension pot and some other source of income, which already gets me clear of means-tested benefits, there is no reason why the minimum income for me should not be zero because I will not need means-tested benefits even if I blow the entire pot. Should not the figure be specific to individuals?

Mark Hoban: I shall not go down that route. As was debated during consideration of the private Members' Bills—the issue has been debated in depth— several factors should be borne in mind. I am trying to emphasise that an alternative to the current arrangement could give people a wider choice in retirement. The minimum retirement income should be enough to ensure that people are not a burden on the state.
	The outstanding issue from the Finance Act 2004 is the tax treatment of left-over funds. It is an inevitable consequence of the structure of alternatively secured pensions that there will be left-over funds, because the rules set a ceiling on the amount that can be withdrawn from the pension. It is therefore inevitable that, on death, the member will leave some left-over funds. That likelihood was mentioned in our deliberations on the Finance Bill in 2004, when the then Financial Secretary to the Treasury, the right hon. Member for Bolton, West (Ruth Kelly), said:
	"We have made this concession because people hold significant, principled, religious objections to the pooling of mortality risk. We will keep the matter under review and check to see whether abuse is occurring. We stand ready to make any changes needed to preserve the integrity of the tax system."—[ Official Report, Standing Committee A, 8 June 2004; c. 485.]
	Since that debate in 2004, a tax treatment has been introduced for the left-over funds in alternatively secured pensions that prevents them from being passed between generations tax-free and therefore achieves the goal set out in 2004 of preserving the integrity of the tax system. In new clause 7 and amendments Nos. 107 to 120, we are seeking to mirror that provision for the left-over funds in retirement income funds, so that they can be taxed in the same way as the left-over funds in an alternatively secured pension, and so that, when the funds pass to the spouse and dependents, inheritance tax would be paid.
	We had a discussion in Committee about the interaction between income tax and inheritance tax. For the purposes of this debate, although we accept the position that the Government outlined in Committee, we would point out that tax rules are now in place to tackle the transfer of wealth from generation to generation, and that those same rules could be applied to retirement income funds.
	The Government have now created the architecture to enable more people to opt out of compulsory annuitisation, through the introduction of alternatively secured pensions in the Finance Act 2004 and the inheritance tax regime in the Finance Bill. I do not wish to rehearse the arguments about why it is appropriate to end compulsory annuitisation, nor do I think that the Government will rush to accept the new clauses and amendments, but the fact that they have given way on the principle of compulsory annuitisation through the introduction of alternatively secured pensions creates a window of opportunity for them to think again.
	I know that, in the pensions White Paper, the Government rejected some of the ideas from the Turner commission on changes to the annuities market, but they will have to monitor the appetite of the market for alternatively secured pensions, following A-day and the introduction of the new inheritance tax regime. They will need to respond to the pressures from the market for an alternative to the annuitisation of pensions at the age of 75.
	For the benefit of those Members who did not participate in the Standing Committee, amendments Nos. 62 and 14 relate to the rules on the recycling of lump sums in clause 159. In Committee, I expressed concern that the clause could be applied broadly, as it seeks to capture circumstances in which peoplepay significantly higher pension premiums in the knowledge that they will receive a higher lump sum. That opportunity has been available for some time, but it is only since the simplification of pensions after A-day that this has become an issue, because of the relaxation of the contribution cap and the facility for pension scheme members to withdraw a lump sum without drawing a full pension.
	The Government's principal concern was what the Economic Secretary referred to as "turbo-charging". The example that he used in Committee was of someone who withdrew a cash lump sum from their pension, reinvested it in another scheme, obtained40 per cent. tax relief on that reinvestment, withdrew 25 per cent. of the amount invested as a lump sum, reinvested that 25 per cent. in another scheme, obtained a further batch of tax relief at 40 per cent., withdrew 25 per cent. of that amount—and so the cycle would continue as the contributions were recycled.
	Clause 159 would stop the abuse of that mechanism, but it could also capture a series of legitimate pre-retirement tax planning arrangements. However, to limit the scope of this rather brief clause, Her Majesty's Revenue and Customs has produced a significant quantity of guidance notes—28 pages containing 21 different examples of how the rules apply—to clarify its remit. The rules are complex, and some industry experts have expressed their concern about that. The Institute of Chartered Accountants of England and Wales has said that
	"the rule will apply only if 'the member envisaged at the relevant time that that would be so'. This is a highly unusual and unclear phrase and is not used in the guidance, which refers to 'pre-planned'. We think it should be redrafted to make it clear that at the time the lump sum was paid, it was the intention of the taxpayer to use all or part of the lump sum to fund additional contributions."
	I will come back to the use of the word "envisaged" later, so as to recapture the spirit of our debate in Committee.
	Rachel Vahey of Scottish Widows has said:
	"Advisers and providers may both have a role to play. Advisers will need to make sure through factfinds that the contribution does not come from a tax-free cash sum. Providers cannot be expected to know where contributions come from. In practical terms, picking out exactly which income stream is the source for a pension contribution could be problematic for affluent clients phasing in their retirement. There is a real danger that the anti-avoidance rule to be inserted into Finance Bill 2006 to stop this practice will be overly onerous and, in the end, create more problems than it solves."
	She has also said that the rules are worrying as they seem to be very complicated—which is what had been feared—particularly as all the examples show how difficult it is to calculate whether contributions have increased significantly. She points out that, as it is up to the scheme administrator to apply the charge to the member if they own up to recycling tax-free cash, any charge that the administrator incurs may also be passed on to the individual, which could leave the member with a charge equivalent to about 70 per cent. of the tax-free lump sum.
	Rachel Vahey added:
	"After putting all these rules in place, it will be very difficult to police. Providers will probably have to change application forms to ask about pre-planning as a part of recycling, and if someone does recycle after denying it on a form, can providers go back to HMRC and say it's not our fault because we asked for a declaration, in order to avoid an administrator's charge?"
	Her conclusion about the Government was:
	"The approach they've taken is using a sledgehammer to crack a nut."
	Iain Oliver, the head of pensions at Norwich Union, has said:
	"HMRC's approach is inconsistent with the aims of simplification. We urge them to fundamentally rethink their approach to prevent unnecessary complication to the retirement and financial advice approach".
	He also said that recycling pension contributions—by taking a tax-free lump sum and reinvesting it to obtain tax relief and a further lump sum—could perhaps be prevented by changes to the self-assessment form or by ruling out its promotion in the Financial Services Authority's code of business rules. He went on to say that HMRC's latest guidance would mean additional paperwork for clients to read and a penalty charge of 55 per cent. on lump sums paid.
	John Lawson, the head of pensions policy at Standard Life, has said that the proposals will be unworkable because the reporting requirements will fall on the individual taxpayer, creating the strong possibility that they will make mistakes or overlook parts of the guidance. He said:
	"It's just incredible, and mind-numbingly complex. I don't think people will be able to get to grips with it. I don't think they can be serious. They've come up with probably their best fist of it, but there's no way it's workable."
	Lawson also asks how the Revenue will prove that people are pre-planning the recycling of tax-free cash, saying:
	"In order for the rule to apply, it has to be pre-meditated, but how do you prove it—how are the Revenue going to read your mind? The only way is to assume guilt in every case, which is a bit harsh".
	That is an understatement.
	7 pm
	I am afraid that anyone seeking clarity on the interaction of those elements from the proceedings in the Committee will end up confused. The Economic Secretary waxed philosophical in Committee. In a Committee stage that had previously been characterised by arguments based on law and accountancy, that was the first debate that drew on the works of the American philosopher Donald Davidson, whose work "Actions, Reasons and Causes" was on the Economic Secretary's reading list and clearly influenced the debate on the word "envisaged". During an exchange on what is now sub-paragraph (2)(b) of new schedule 3A, the Economic Secretary said
	"Envisaging is a broader term; it might be an intention on behalf of someone else, rather than a personal intention. 'Envisaging' may mean opening up the possibility that someone else may use the provision—in this case, to recycle the lump sum on that date. If 'envisaging' were used, that case would be caught. The difference between 'envisaged' and 'intended' is subtle but essential. 'Envisage' will cover the concept of intention, as sought by the amendment, and will go a little wider, so as to ensure that we catch all necessary cases."—[ Official Report, Standing Committee A, 20 June 2006; c. 743.]
	The Institute of Chartered Accountants has said of the word "envisaged":
	"This is... highly unusual and unclear".
	My goodness! That exchange, and those surrounding it, certainly demonstrated that.
	Before the debate, I took the opportunity to find out a bit more about Professor Davidson. He wrote copiously about natural semantics, something with which I suspect the Economic Secretary is familiar. Perhaps he has used natural semantics himself at various times in his professional career, both inside and outside the House.

Mark Hoban: What the Economic Secretary has said demonstrates why the position is not as clear asthe hon. Member for Wolverhampton, South-West suggested.
	Let me now deal with an issue that relates to amendments Nos. 62 and 14. The Chartered Institute of Taxation said that it was happy with both the clause and the guidance notes. The clause will remain on the statute book if the Bill is given its Third Reading tomorrow, but the guidance notes will not be on the statute book. HMRC can alter them.
	My point is that there should be more certainty and more clarity about the tax regime. That is why the amending provisions propose that the Treasury be given regulation-making powers to set out the application of sub-paragraph (2) in order to create that certainty. The issues covered in the guidance notes would then be on the statute book through secondary legislation, so they could not suddenly disappear or be changed overnight without proper parliamentary scrutiny. Revenue and Customs and the Treasury would then be forced to produce clear, watertight wording rather than use 21 examples to clear up the scope and application of clause 159. It provides a way of moving from abstract philosophical treatises to the concrete reality of law and regulation. We would also be able to revisit the guidance when it changes as the statutory instruments would need to be amended.
	I was grateful to the Economic Secretary in Committee when he made a kind offer, namely, that if significant material changes were made in the guidance, he would ensure that they were circulated to the Opposition so that we would have a chance to comment upon them. He said that he would take advice to ensure that the Government continued to take a consultative approach to guidance issues. I am flattered, as would be my successor, to be given the opportunity to comment at some point when the guidance changes, but rather than leaving it to a single Member to comment, it would be preferable if the Committee had the opportunity to question the regulations. My proposals are an attempt to achieve some clarity, consistency and parliamentary scrutiny to ensure that the guidance notes, which are such an integral part of the application of clause 159, achieve a degree of security and certainty. It is an important matter and I conclude my remarks on that point.

Julia Goldsworthy: The Conservative new clause 3 provides an alternative to the current position, whereby people are forced to buy an annuity with their pension funds when they reach 75. The Conservatives have made that proposal before, most notably through the private Member's Bill of the hon. and learned Member for Harborough (Mr. Garnier) in 2002. As the hon. Member for Fareham (Mr. Hoban) said, the issue was raised more recently in connection with the Finance Act 2004 and the Pensions Act 2004.
	I draw the House's attention to the ping-pong with the other place at the later stages of the Pensions Bill. This very matter was one of the most significant issues debated and it was the collapse of the Conservative vote in the House of Lords that prevented the opportunity of the provision being written on to the statute books. If the Conservative peers had been able to vote, perhaps we would not be debating the matter now.
	The new clause is designed to limit the requirement to purchase an annuity to the amount that would give the annuitant a minimum retirement income, and it would provide greater flexibility over the remaining residual fund. That contrasts with the current situation in which 75 per cent. of the funds from a money purchase pension must be used to purchase an annuity by the age of 75. Since the scheme was set up, life expectancy has increased considerably, which alone might provide the Government with a reason to look into the matter again. The new clause would amend the Finance Act 2004, set up a retirement income fund and create a rule whereby withdrawals cannot be made unless the individual has purchased a relevant annuity that is linked to the retail prices index.
	The hon. Member for Fareham will know that the Liberal Democrats have supported the approach in principle in the past and we do not intend to change our minds today—we will still be on the side of the angels. However, I have one query about the drafting of the new clause in respect of an issue that my hon. Friend the Member for Northavon (Steve Webb) has mentioned.
	The principle behind the minimum retirement income is that it exists to prevent individuals from withdrawing all their money from their pension and falling on to state benefits. The annuity that would need to be purchased under new clause 3 would prevent that from happening, but in terms of qualifying for state benefits, all income is taken into account, not just the income from the annuity. The hon. Member for Fareham assumed that my hon. Friend the Member for Northavon was talking about fluctuating income, but it could affect someone with a steady income close to the minimum income. If they were below it, they would fall on to state benefits. However, under the provision, all the money in the pension pot would need to go into the annuity to provide a minimum income that, together with their other income, might take them significantly above the minimum income requirement in the new clause. I hope that the hon. Member for Farehamwill clarify the operation of the new clause in that respect.
	Finally, I have a question for the Economic Secretary. The Secretary of State for Work and Pensions promised a review of the pensions situation following the Turner report. When might we see that?

Steve Webb: I want to make a brief contribution. These days, I follow health matters, but when I saw that annuities were to be debated today I could not resist one last bash.
	I am sure that our new Economic Secretary, who studied philosophy, politics and economics at Oxford, will be familiar with the concept of a Pareto improvement—that it is possible to act in such a way that no one is worse off, but someone is better off. In economics, of course, that is highly desirable. The reform of annuity law is a Pareto improvement—what these days we would call a win-win situation. No one loses if we can reform annuities in a way that gives people choices, at no cost to the taxpayer. As has been noted, the implications for means-tested benefit expenditure and the possible loss of tax revenue arethe two areas of worry in terms of cost to thetaxpayer.
	New clause 3 is rather excessive in its attempts to deal with the risk falling on means-tested benefits. It is too prescriptive because, as I said in an earlier intervention, some people might be able to draw down their entire pension pot and still not run any risk of falling within the realm of means-tested benefits. However, new clause 3 would oblige them to buy an index-linked annuity of a certain value. The official Opposition do not know how much that would be, even though they want us to support the new clause, but that proposal is unnecessary and unduly restrictive.
	We understand that there has to be a fail-safe—and I believe that it should be individual-specific—to ensure that a person's pension pot is not raided to such an extent that he or she falls at the mercy of means-tested benefits. However, I have always believed that the Treasury always gets its tax money anyway. For example, tax is paid when a pension pot is drawn down, and also when people leave money when they die.
	The Treasury's ideological line is to convince us that tax relief is some sort of incentive. By and large, with the exception of what happens with the lump sum, tax relief is about taxing things once rather than twice. Our tax regime gives tax exemption on the way in and levies tax on the way out, but that is no reason to say that any change would undermine the incentive purpose of tax relief. Pension tax relief is about avoiding double taxation, not about incentives.
	As long as the tax is paid at the end in some way, why should the Treasury care how it is paid? It could be paid as a charge on the un-annuitised fund at death, or on the pension that is eventually drawn at the end. It could be also be paid on the money drawn out while a person remains alive, but the Treasury will always get its tax, so who loses?
	New clause 3 is unduly cautious, although the hon. Member for Fareham (Mr. Hoban) noted that the Government have given ground in response tothe concerns expressed by the Plymouth Brethren. However, society always benefits when people in their old age are given new choices about their income. It is true that we are talking here about those who are better off, but that is no problem for the new Liberal Democrat party. Giving people choices is all part of our new approach. We approve of new freedoms for people on higher incomes to make choices.
	The new clause would give a limited number of people new choices, at no cost to the Exchequer. I cannot see why a reasonable man such as the Economic Secretary would not be persuaded by that argument.

Edward Balls: I am pleased to respond to the debate, and to have an opportunity to restate the Government's policy on annuities. However, I shall first answer the point made by the hon. Member for Northavon (Steve Webb). I shall resist all temptation to stray on to the philosophy of Mr. Davidson or the economics of Mr. Pareto. The hon. Gentleman defined a Pareto improvement as something that left no one worse off and a number of people better off, which sounds to me like the definition of a Labour Government.
	We estimate that the cost of the new clause would be around £100 million. It is certainly not cost free. To implement and pay for it, the Liberal Democrats would have to raise from capital gains tax increases not£12 billion but £12.1 billion. Moreover, we discussed the Conservative idea of abolishing inheritance tax—at a cost of £1 billion—when we considered the previous group of amendments. Adopting new clause 3 would cause that total to rise to £1.1 billion. I therefore counsel hon. Members of both Opposition parties to be cautious about adopting policies that would cost £100 million, given that some of the other commitments that they have made would require substantial tax increases elsewhere.
	I said that I wanted to restate the Government's approach to annuities, and to reiterate the response to the recommendations of the Pensions Commission made by my right hon. Friend the Secretary of State for Work and Pensions in his recently published White Paper. In that document, we reiterated our policy of securing an income in retirement, and we rejected the principle underlying this new clause—that people aged 75 should not have to buy an annuity. At the same time, in response to some of the points made by the commission, we undertook to publish later in the year a detailed paper setting out the evidence base for our policy.
	The Government's policy on annuities is very clear. Very generous tax reliefs are provided to encourage people to save for their retirement. Contributions may be paid with the benefit of tax relief and investment income and growth may accumulate in a pension fund tax free. In addition, when people come to take their pension benefits, they can take up to 25 per cent. of their total pension pot as a tax-free lump sum. In return for those generous tax incentives on the way in, there are long-standing rules that require a person, by the age of 75 at the latest, to convert the remainder of the pension pot into a secure retirement income for life, or to provide for dependants' benefits. Over 90 per cent. of people aged 70 have already bought an annuity, so only a very small number of people have to make such decisions when they reach 75.
	I shall deal later with the Pensions Commission's recommendations on annuities, but its report endorsed the fundamental principle that a retirement income should be secured by an annuity, in return for tax relief on the way in. It said:
	"Since the whole objective of either compelling or encouraging people to save, and of providing tax relief as an incentive is to ensure people make adequate provision, it is reasonable to require that pension saving is turned into regular pension income at some time."
	For the vast majority of people who do not get a pension paid directly from their scheme, an annuity will be the best way to secure an income for their retirement. The most recent evidence suggests that annuities are fairly priced and value for money. People do not know how long they will live after they retire, and tend to underestimate their longevity. Without a requirement to secure an income, there is a danger that they will run down their retirement savings either too fast or too slowly.
	Insurance companies know, broadly and on average, how long people will live, and offer products that pool the risk. Welfare is therefore improved at the aggregate level.

Edward Balls: I shall give a more detailed explanation of the £100 million cost of the new clause in a moment, but I can tell the hon. Gentleman that the median pension pot is about £25,000 a year, although many people get much less than that. To achieve an annuity of that size, a person would have to have a pension pot very substantially above the median amount. The pension pots of 19 people out of 20 would be too small to give an annuity of that size. We are talking about a policy that would benefit only the wealthiest 4 or 5 per cent. of the population in pension pot terms.
	The hon. Member for Northavon also made a point about tax. We pay substantial amounts of tax relief on the way in and, if we were to have an equivalent tax take on the way out, to make sure that people saving for a pension were not advantaged by knowing that they could pass it on with inheritance tax paid at the end, inheritance tax would need to be substantially higher than the current rate. I accept that Members have tabled supporting amendments to apply inheritance tax charges, but the reason that the cost will be £100 million is that charging inheritance tax would not come anywhere near to clawing back the kind of tax benefit that a person would receive from going in with tax reliefs but then not buying an annuity. The fear is that there would be a substantial amount of tax planning for pensions that avoided the need to buy an annuity. The number of beneficiaries might rise slightly above the 4 per cent. of the population who would benefit from new clauses 3 and 7, but it would still be a minority pursuit, which would be expensive for the taxpayer and would require tax rises elsewhere, to no benefit.

Edward Balls: No, the pot, because a person would transfer their pot into purchase of the annuity.
	Over and above the already generous tax incentives for saving for pensions on the way in, we have introduced flexibility in a number of ways over the last few years, through the Finance Act 2004 and also through the new tax regime that we introduced on6 April, which gives much greater flexibility and simplicity for pensions saving. We have added flexibility to saving for retirement provision in several ways.
	First, as the hon. Member for Fareham (Mr. Hoban) mentioned earlier, we are continuing in the new regime the facility to defer taking an annuity and instead to take income withdrawal. Annuities often represent the most efficient way of turning a capital sum into income, but there could be circumstances—perhaps when the scheme member was relatively young and there was a reasonable expectation that the underlying investments of the pension scheme would perform well—when some people might benefit from not being tied into the then prevailing annuity and gilt rates paid later in life. As Members know, the income draw-down rules introduced by the Government allow people to take an income and defer taking an annuity until a more opportune occasion.
	The hon. Gentleman gave the impression, perhaps inadvertently, that there are no limits on the degree of draw-down. That is not correct; there are clear rules that allow, in the new regime, a maximum amount to be drawn down for income withdrawal, while allowing resource to remain for the purchase of the annuity—the income guarantee, which is the prime motivation for the existence of the tax reliefs. By contrast, the facilities offered under new clauses 3 and 7 would actually allow the whole amount—way beyond the maximum level we have set in the draw-down legislation—to be taken in draw-down without the need to buy an annuity.
	Only a small minority of people have sufficient wealth to benefit from those opportunities in a way that sensibly assesses risk. Only those individuals could take the risk of not making provision through an annuity. Our view is that providing a substantial tax advantage to allow that, as the new clauses would do, for one in 20 of the population with a pension pot at age 75 would not be the right way to spend taxpayers' money.
	A second way in which we have added flexibility is that tax rules now allow a new product, a limited period annuity, which enables someone vesting their pension fund to use part of the fund to provide an annuity for a maximum period of up to five years. We have also made a change to allow value-protected annuities to be offered, to allow a return of capital on an annuity where a member dies before reaching age 75.
	As the hon. Member for Fareham reminded us, we have also introduced an alternatively secured pension—ASP—for pension scheme members who have not secured their pension benefits by age 75, where the member has a principled religious objection to the pooling of insurance and mortality risk. As the hon. Gentleman knows, and as the quotation from my right hon. Friend the Member for Bolton, West (Ruth Kelly) to which he referred makes clear, it was always our intention that the rules would apply in the specific and narrow case of individuals with such principled religious objections such as the Christian Brethren. It has always been our intention to replicate the secure lifelong income obtainable from an annuity through those measures, but not to allow that to become a way in which a small and wealthy minority could benefit substantially from tax advantages to the cost of taxpayers overall. We have always made it clear that we shall not allow those concessions to be taken up more broadly to get round the annuity rules. This is not a mainstream product and it must not become a tax avoidance measure. We shall not be going down that road.
	Finally, we have taken steps to ensure that more people with small retirement funds can avoid the need to purchase an annuity which, although secure and guaranteed, is neither cost-effective to pay or to receive, because the amount in the pension pot is so small.
	The hon. Member for Fareham mentioned the Turner commission report and we shall be setting out a detailed paper in response later in the year. The Turner report looked at pensions policy 20 or 30 years ahead and the commission advises us to look at all the issues in the round over time, including limits and ages. We shall certainly do that. Following publication of the first Turner report, we took up the suggestion that we should examine the case for not requiring the full purchase of an annuity at 75. Our view is that our policy is right for the present and that to follow that suggestion would be complex and bureaucratic and benefit only a small minority at wider expense to the taxpayer, all as a result of substantial increases in tax rates. That would be the wrong road for us to take.

Steve Webb: The Minister gave us what sounded like a precise estimate of the costs, although I believethem to be closer to zero. Is he willing to put in the Library a detailed note setting out where his figure of £100 million comes from?

Edward Balls: I shall be happy to do so. If the hon. Gentleman were to ask me a written question, I should be happy to provide him with the figure, but I think that he will find that it is £100 million. The Revenue has much experience in such matters. We understand exactly the motivation behind the proposals. To be more precise, my estimate is that the figure would be upwards of £100 million, which may mean that thesize of capital gains tax rise that the Liberal Democrats would need will creep up from £12.1 billion to£12.1 billion-plus. We are looking forward to hearing the details of the Liberal Democrats' tax policies and how they intend to reconcile their commitment to supporting wealth, prosperity—

Mark Hoban: I thank the Economic Secretary for his remarks. He has given a fairly lengthy speech on the new clauses 3 and 7 and the amendments. After listening to it, I am unconvinced about the Government's rationale for opposing new clause 3. The hon. Member for Northavon (Steve Webb) referred to the opportunities that a change to the annuitisation rules would create: an improvement whereby a number of people would gain, whereas others would not lose. Such a change could go further than that. Certainly, the Turner commission's view was that, yes, some people would gain directly, but a great many people would gain indirectly through lessening of the pressure on annuities and markets in the long term. Many people would seek to achieve that gain, particularly as there would be more demand for annuities in the future, with a shift from defined benefit schemes to defined contribution schemes, as I said in my opening remarks.
	The Treasury is fighting a rearguard action. The Economic Secretary talked about the alternatively secured pension scheme being available for a small number of people, but more people will take advantage of such schemes. There will be an appetite for that, because people do not want to be tied to the idea of a compulsory annuitisation of the pensions at the age of 75. They want to have the flexibility in retirement to use their funds in a different way. They want to determine their income. They are concerned about the declining annuity rates and the impact of that on their pensions. On that basis, I propose to press new clause 3 to a vote.
	I want to make a final remark on recycling. The Economic Secretary sought to persuade us that our fears about the use of such rules are ill-founded, that the guidance is sufficiently robust and applicable, and that we should have no concerns about it. I am afraid that, on that, too, I am not persuaded, and with the leave of the House at the appropriate time, I will seek to move either amendment No. 62 or 14 formally, but I ask my hon. Friends to vote for new clause 3 and I invite the Liberals to be on the side of the angels again, as the hon. Member for Falmouth and Camborne (Julia Goldsworthy) said earlier, in voting with us tonight on new clause 3.

Mr. Deputy Speaker: With this it will be convenient to discuss the following:
	New clause 6— VAT and hydrocarbon oil duty offset—
	'In the Hydrocarbon Oil Duties Act 1979 (c. 5) section 6 (excise duty on hydrocarbon oil) there is inserted after subsection (1A)—
	"(1AA) In every Budget Statement the Chancellor of the Exchequer shall provide his forecast for oil prices and set out anticipated yield from fuel duty and VAT on fuel for this price and for a range of prices up to 50 per cent. above his forecast.
	(1AB) In his 2006 pre-budget report the Chancellor of the Exchequer shall bring forward a mechanism for—
	(a) using additional revenue from VAT on fuel above forecast to offset fuel duty when the oil price rises above his forecast level, and
	(b) providing specific fuel duty reductions targeted at fuel sold in sparsely populated areas;
	and the Chancellor of the Exchequer shall by order define 'sparsely populated areas' for the purposes of this section.
	(1AC) Whenever international oil prices rise above the level estimated by the forecast made in accordance with subsection (1AA), indexed fuel duty increases shall be frozen until the international oil prices return to the forecast level.".'.
	Amendment No. 123, in clause 13, page 14, line 15, leave out Table A and insert—
	
		
			  CO2  Emissions  figure   Rate 
			 (1) (2) (3) (4) (5) 
			  Exceeding  Not Exceeding  Reduced Rate  Standard Rate  Premium Rate 
			 Households with a postcode ina remoterural area   Householdswith a postcode ina remoterural area   Householdswith a postcode ina remoterural area 
			 g/km g/km £ £ £ £ £ £ 
			 100 120 30 15 40 20 50 25 
			 120 150 90 45 100 50 110 55 
			 150 165 115 57.50 125 62.50 135 67.50 
			 165 185 140 70 150 75 160 80 
			 185 - 180 90 190 95 195 97.5 
		
	
	Amendment No. 129, page 14, line 26, leave out Table B and insert—
	
		
			  CO2  Emissions  figure   Rate 
			 (1) (2) (3) (4) (5) 
			  Exceeding  Not Exceeding  Reduced Rate  Standard Rate  Premium Rate 
			 Householdswith a postcode ina remote rural area   Householdswith a postcode ina remote rural area   Householdswith a postcode ina remote rural area 
			 g/km g/km £ £ £ £ £ £ 
			 100 120 30 15 40 20 50 25 
			 120 150 90 45 100 50 110 55 
			 150 165 115 57.50 125 62.50 135 67.50 
			 165 185 140 70 150 75 160 80 
			 185 225 180 90 190 95 195 97.50 
			 225 - 200 200 210 210 215 215 
		
	
	Amendment No. 125, page 15, line 8, at end insert—
	'(3A) After paragraph 1B insert—
	"1BB For the purposes of paragraph 1B above, 'remote rural area' shall be defined in regulations made by the Treasury by statutory instrument.".'.

Danny Alexander: The hon. Gentleman anticipates a later part of my remarks, so if he will allow me I will press on.
	Median earnings in the highlands and islands are some 85 per cent. of the UK figure, so the inequitable situation that I described hits an already poorer region very hard. Before coming to the Chamber today, I conducted a random survey of pump prices for a litre of unleaded petrol. In Aviemore in my constituency, where I happen to live, the current price is 99.9p per litre. In Dalwhinnie, a little further south, it is 102p per litre. In Thurso, in the constituency of my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso), it is 102p per litre. In Lerwick, in the constituency of my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael), it is 106.9p per litre. By comparison, at Asda in Leeds the price is 92.9p, while in Morrison's in Camden in north London, it is 90.9p.
	At its broadest, the variation is nearly 20p per litre. In my home town of Aviemore, which is on the A9, one of Scotland's main trunk roads, my constituents would pay some 10p per litre more than constituents of hon. Members in London. For an average-sized small car, that might equate to an extra £4 on a tank of petrol. The final price of a litre of fuel includes VAT, so we have the anomalous situation whereby we are paying more in VAT than elsewhere because the retail price for fuel is higher. In sum, the main beneficiary of higher fuel prices in rural areas such as the highlands and the islands is the Exchequer. The new clause proposes a system to return that rural windfall to some of the areas whence it came.
	The high price of road fuel in the highlands and islands has done, and is doing, considerable social and economic damage to some of our most vulnerable rural communities. This is not just about business people with big cars and high mileages; it is about people on low incomes in relatively poorly paying sectors such as tourism, retailing and food processing, of which we have a high share in the highlands and islands. The low population density means that there can be long distances to public services such as hospitals and to places of employment, with no alternative but to usea car.

John Bercow: The hon. Gentleman should not be sedulously tempted down that narrow path, on a completely unrelated issue, by the hon. Memberfor Wolverhampton, South-West (Rob Marris). I understand the concern about the perceived inequity of differential pricing, but can the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) tell the House for what proportion of the purchase price per litre in his constituency excise duty accounts?

Paul Goodman: The hon. Gentleman plainly has not read the list of amendments in front of him grouped under the heading "Hydrocarbon oil duty and vehicle excise duty". He will see, if he reads it, that amendments Nos. 123, 129 and 125, which are all part of this group, refer to vehicle excise duty. I suggest that next time, he read the selection list before making an intervention. Since the earlier amendments were substantially the same as two of those in the group that we are now considering, I want to refer back to them for a moment.
	The first proposed to reduce the rate of VED for the most polluting vehicles registered before 23 March this year owned by households with a postcode in a remote rural area. The second proposed not to change the rate of VED for the most polluting vehicles registered after 23 March owned by households with a postcode in a remote rural area. The third proposed to raise the rate of VED for the most polluting vehicles registered after 23 March owned by households with a postcode in a remote rural area.  [Interruption.] The hon. Member for Falmouth and Camborne (Julia Goldsworthy) says from a sedentary position that the latter was not selected. I was not claiming that it was selected, although as she has raised the point, one might question the wisdom of tabling an amendment that cannot be debated—but I shall return to that in a moment.
	After the debate in the Committee of the whole House, which those of us who were there remember with affection, the Liberal Democrats chose not to press their amendments to the vote, which suggested to the rest of us a certain lack of confidence in them. I shall return to that point later. It is not perhaps a very good sign that three of the amendments in this group cover the same ground as was covered during the debate in the Committee of the whole House.
	Our view is straightforward: we acknowledge the seriousness of the transport problems faced by people who live in remote rural areas, to which I shall return later. Indeed, Conservative Members represent the bulk of rural areas—although, I concede, not the bulk of remote rural areas as the Liberal Democrats are defining them. However, we believe that the one-off cost of VED is not the main problem faced by people who live in remote rural areas, and that any fiscal solutions to those problems must be fair, simple to administer and proof against fraud, and above all they must not simply leave a black hole in the Government's accounts.
	With the greatest respect to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), who spoke to the new clause, which I shall come to in a moment, it is very hard to see how it can be fair simultaneously to reduce the rate of VED for the most polluting vehicles registered before 23 March this year owned by households with a postcode in a remote rural area, as amendment No. 123 proposes, and not to change the rate of VED for the most polluting vehicles registered after 23 March owned by households with a postcode in a remote rural area, as amendment No. 129 proposes, while wishing all the while, apparently—I shall not dwell on this point, even though it is potentially a little embarrassing for the Liberal Democrats—to raise the rate of VED for exactly the same households in exactly the same circumstances, as amendment No. 124 proposes. As I say, I shall not dwell on the amendment that the Liberal Democrats tabled but which we cannot debate. I shall move on.

Paul Goodman: My hon. Friend is never lost for an apt quotation, and I cannot think of a more apt one myself, although he may well be on his feet in a moment to suggest another.
	I turn to the tests of simplicity and of fraud. Registering vehicles that belong to households with a postcode in a remote rural area for lower rates of VED is scarcely likely to be simple in practice. As the Financial Secretary pointed out on 3 May, motorists could easily register vehicles in designated remote rural areas and then use them predominantly or exclusively in urban areas, since, as I hope the Liberal Democrats will concede, a car registered in a more rural area can in fact be driven to an urban area.
	Then there is the question of cost. AmendmentNo. 125 invites the Treasury to define "remote rural area" in regulations. New clause 4, which was also tabled by the Liberal Democrats and to which the hon. Member for Inverness, Nairn, Badenoch and Strathspey has just spoken, refers to remote areas and, as he made clear, proposes lower rates of duty.
	As the hon. Member for Dundee, East (Stewart Hosie) pointed out in a telling speech on 3 May, there is no agreement on the definition of a remote area. The description offered by the Scottish Executive covers98 per cent. of Scotland's landmass, and 18.7 per cent. of the population. The hon. Gentleman cited the Randall definition, which is based on sparsity of population and covers 89 per cent. of Scotland's landmass and takes in 29 per cent. of the population. If the Liberal Democrats could offer a definition that commanded consensus they would surely have included it in new clause 4, rather than pass the parcel to the Treasury.

Alistair Carmichael: My hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) says that he can, so I will let him do so. Tellingly, the hon. Member for Wycombe reminded us why there are no Tory MPs left in the highlands and islands, where they used to represent a broad swathe of constituencies north of the Mull of Kintyre. The hon. Gentleman said that he did not know how much the proposal will cost, but he presumed that it would be a great deal. Why does he hold such a preconception? Why did he not say that he did not know how much the proposal would cost, but that he was prepared to take an objective and fair-minded approach to it?

Alistair Carmichael: I have already told the hon. Gentleman I do not know exactly how much the proposal will cost, and I am unashamed to say so. If my hon. Friend the Member for Caithness, Sutherland and Easter Ross has a figure, no doubt he will favour us with it. The fact is, there is a basic inequity born of market failure. Liberal Democrats are prepared to talk about it, and to offer solutions which, whether or not they are costed, indicate a willingness to addressthe problem that is remarkably lacking among Conservative Members.

John Bercow: The hon. Gentleman is extremely adroit in making the best of a bad case. I am relatively non-committal on the issue, and I am genuinely ready to be persuaded, as I am not overly preoccupied with the verdict of shadow Ministers, as the hon. Gentleman has probably noticed over the years. We have been confronted with the cumulative intellectual weight and financial acumen of the hon. Member for Falmouth and Camborne (Julia Goldsworthy) and the hon. Member for Eastleigh (Chris Huhne), yet the hon. Member for Orkney and Shetland (Mr. Carmichael) is unable to vouchsafe to the House the financial cost of the new clause tabled by his hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), so I am a little anxious.

Alistair Carmichael: The hon. Gentleman's anxiety always causes me anxiety. Indeed, I took a similar view of those on the Front Bench until I joined my own. Measures beyond number have been introduced in the House, both by the present Government and by Conservative Governments, without an exact financial quantification. We have proposed a principle to deal with a problem that causes serious economic and social hardship. As is often the case in the House, we should allow the details to follow later. Accepting the proposal commits the Government to nothing. It is an enabling measure, rather than a prescriptive one, that gives them the power to deal with the problem. I have lost count of the number of occasions in Committee and on Report when the Government have proposed such enabling measures and said, "Trust us—we'll deal with this later." We are giving a power to the Government, and we are prepared to trust them to do the work and bring the figures to the House at a later stage.
	The proposal introduced by my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey is necessary. As he has pointed out, people using the cheapest petrol pumps in my constituency pay about 105p per litre. In the remoter parts—the outlying parishes in Orkney and in Shetland, and the outer islands away from the mainland of Orkney and Shetland—the price is much higher than that. When I was first elected in 2001, people in Hoy in Orkney were already paying more than £1 per litre. That causes real financial difficulty.
	Many of the people living in those communities are on low and fixed incomes. They do not have public transport running at the bottom of their road every five or 10 minutes. They have to use a private car because they have no option. The Government take in the form of value added tax, quite apart from the fuel duty, hits those people particularly hard because they start from a lower income and pay more.
	In the villages and towns in my constituency, petrol is sold from small petrol pumps and shops that do not have the purchasing power of Asda, Tesco and other big suppliers in the towns and cities. That is the root of the problem. The Treasury has come up with all sorts of answers. It has told us that we cannot introduce such a measure because people will drive from areas where they already get cheap petrol to areas such as those represented by my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey—my goodness, I wish he had a shorter constituency name—simply to get petrol that they could buy, at best at the same price, and probably cheaper, if they stayed at home. The logic of such objections does not bear rational examination.

Julia Goldsworthy: If the hon. Gentleman has such resources at his fingertips, he could have raised the issue himself. If the communities that my hon. Friends described had access to buses, they would happily provide subsidised fares, but for many of those communities there are no bus services and to provide them would be worse for the environment. An equivalent service to the one in the hon. Gentleman's constituency could not be provided.
	I draw the hon. Gentleman's attention to the comments made to those on his Front Bench in the discussion of minimum pensions income. His Front-Bench team will remind him why it is not possible to give detailed information. The reason why we refer to Treasury regulations is that there is no UK definition of a remote rural area. There are definitions that apply to England and Wales, but if those were mentioned in the new clauses and amendments, they would not include Scotland. My hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) is therefore trying to produce enabling measures in order to provoke a debate. Transport costs alone make fuel significantly more expensive in the highlands than in more densely populated parts of the UK. We are trying to respond to problems experienced across the country. All the amendments and new clauses in the group try to deal with those problems in different ways.
	One solution would be to more forward more quickly on road user charging, which would be a more flexible way of discouraging car journeys in congested areas, which cause the most pollution, while not penalising those who do not generate congestion and who do not have access to public transport alternatives. If the Minister can tell us that the Government intend to push forward on such a long-term policy, we would welcome it, and we would welcome a time scale.
	Costs are much higher in rural areas and there is no immediate solution. The 2003 national travel survey for England showed that half the residents in rural settlements of fewer than 3,000 people lived within30 minutes' walk of a bus stop. That compares with95 per cent. of people living in larger urban areas. I am sure that in many parts of the constituency of my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey people will have an even longer walk.
	Those rural residents are likely to spend more per week on transport than their urban counterparts. The expenditure and food survey for 2002-03 showed that households in rural areas with a population of fewer than 3,000 spent more than £70 a week on transport, compared with £45.50 for those living in urban areas. Half their expenditure goes in operating costs, a large proportion of which is the cost of fuel.
	New clause 4 seeks to lower the rate of duty in remote areas, as defined by the Treasury, and would give the Government the powers to apply for a derogation from the energy products directive, as has recently been successfully undertaken by the French Government. I understand that that was unanimously approved by the EU, as was referred to earlier, which means that it must have had the support of the UK Government. Why does the Minister think that remote and rural areas in the UK do not fulfil the same objective socio-economic conditions as the regions in which the derogation is applied in France?
	Because of the lack of transport alternatives, consumers are unable to respond to price incentives. They just have to bear the higher cost, since there will be no cheaper alternative. Hence this proposal is logical and fair, not least because incomes also tend to be lower in more isolated and often more economically deprived constituencies. Although I represent a constituency at the opposite end of the UK to that of my hon. Friend, many of the experiences and difficulties that he has described are familiar to me and my constituents.
	The amendments tabled in my name seek to achieve similar ends to the new clause, but I am not proposing that both alternatives should be put forward simultaneously. As I have said, we seek to propose a range of alternatives to highlight the situation and provide the Government with a range of approaches. We know that the alternative proposed by my hon. Friend works because it has been applied in other countries. Unfortunately, because all our amendments have not been selected we will not be able to vote on the whole package that we have proposed, so I hope that my hon. Friend will press his new clause to allow the Treasury at least to consider the issues.
	The fundamental reason for providing such a concession in my amendments is to recognise the high cost of travel in rural areas. They allow for the revalorisation of fuel duty to continue. We welcomed that when the Chancellor announced it in the Budget. If that continues, and if it is the Government's intention to increase the share of green taxation as a proportion of the total tax take, it will be those people whose behaviour will not be affected by the increases who will have to bear the costs. Therefore, we seek some way of offsetting those costs for people who cannot change their behaviour.
	I draw the Minister's attention to two issues. The first is the extent to which the differential for the new highest band, which the Chancellor announced in the Budget, will impact on behaviour, and how it will encourage more environmentally responsible choices. In his Budget speech, the Chancellor said:
	"I want to do more to encourage cleaner fuels and cars. I propose to radically reform vehicle excise duty. I am introducing...a new band of £210 for the small number of new cars that are the most polluting".—[ Official Report, 22 March 2006; Vol. 444, c. 295.]
	In a written answer the Financial Secretary gave the number of people who would be persuaded by that amazing new band to change their behaviour. As a result of these proposals, carbon emissions will fall by a fraction—less than 1 per cent. Therefore, our amendments seek to point out the incredibly limited impact that the Government's proposals will have and to present ways in which they might like to achieve a more significant impact on behaviour. In this respect, people in rural areas, as well as in urban areas, will have the opportunity to exercise choice to offset those costs. When they are purchasing a new car they can decide, like people in urban areas, to buy a car with lower emissions. However, they cannot decide how much they pay for their fuel. That is the inequality that we seek to address.
	I hope that the Government will at least recognise some of the difficult circumstances that many of my constituents and those of my hon. Friend and others in rural areas across the country face, and I hope that they are prepared to take on board the need to recognise their difficult circumstances. If he does not wish to accept any of our proposals, I would be interested to hear how he plans to ensure that people in rural areas are protected from any further measures that the Government may plan to take in relation to fuel duty and vehicle excise duty that will significantly increase their transport costs despite the fact that ultimately they will have no alternative to the car and hence will have to bear those costs rather than change their behaviour to the benefit of the environment.

Rob Marris: I have to say that we are having a somewhat confused debate. The proponents of the motor fuel— [ Interruption. ] I want to offer some clarity to the hon. Member for Eastleigh (Chris Huhne), which Members of his party have signally failed to do. I will not address any remarks to new clause 6, but I shall speak to new clause 4 andthe amendments. The hon. Member for Wycombe(Mr. Goodman) gave an interesting figure. He will correct me if I am wrong, but I think that he said that 29 per cent. of the population would be in a rural area.

Rob Marris: I am glad that the hon. Gentleman has come up with a figure, but for the moment I shall stick with the figure on which I have based my calculations, as it was the only one before us before that intervention.
	There are approximately 20 million private motor cars on United Kingdom roads. I estimate that the average rate of vehicle excise duty is £150 a vehicle, based on clause 13. That would generate vehicle excise duty of approximately £3 billion a year. If we take29 per cent. of that, that means that the Liberal Democrats are proposing, in round terms, an almost£1 billion giveaway.

Rob Marris: I apologise to the hon. Gentleman. I thought that his colleagues were moving an amendment to the Bill that would cover the whole of the UK, as provisions on vehicle excise do. Therefore, I based my calculations on the whole of the UK, and at least I have the guts to put forward some figures,which thus far he and his hon. Friends have not done. They are talking about a giveaway of approximately£1 billion, based on the 29 per cent. cited by the hon. Member for Wycombe. If we use the figure of 5.4 per cent., the giveaway is about £150 million—it is difficult for me to do that calculation in my head. They should at least put forward some figures.
	Let us look at new clause 4. The hon. Member for Orkney and Shetland (Mr. Carmichael) did not seem to understand the mathematics of what I put forward in my intervention, so I am having to make a speech. New clause 4 would give the Treasury some power, but the hon. Members who support it will not indicate any way in which that power might be exercised, so I will make a suggestion. If they do not like the figures, they can come up with others. That way, at least we will then have some figures before us in this debate.
	Page 13 of the Red Book tells us that excise duties in the UK raise £40 billion a year. If half of that comes from vehicles—excise duties come in from other sources, too—the amount is £20 billion. I suspect that I am making a conservative estimate of the proportion of excise duties that come from vehicles, but I will use it. If we take off the figure that I gave earlier as an estimate of the total UK vehicle duty, which was£3.3 billion a year, based on 20 million private vehicles and with an average excise tax disc duty of £150, that leaves us with £16.7 billion coming principally from fuel, and 29 per cent. of that is about £5 billion. New clause 4 does not give us any formula for by how much its supporters wish vehicle excise duty to be cut, but if it were cut by 50 per cent. in rural areas, that would amount to a £2.5 billion giveaway. On the only figures before us—others can put forward their own figures—these amendments would provide for a tax giveaway of getting on for £2.5 billion to £3.5 billion. That is a great deal of money. It is being said, cavalierly, "We cannot put any price on this. We have not looked at the figures and it is all up to the Treasury." That is irresponsible in a debate on the Finance Bill. As ever, the Liberal Democrats are under-prepared. They have not done their homework.

Mr. Deputy Speaker: Order. I think that it would be a good idea if we returned to the new clause that is before the House.

Christopher Huhne: The key point, which my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) made explicitly, is that the proposal is designed to be part of a package that will, taken inits whole, have a dramatic effect in providing a disincentive to the burning of fossil fuels, and therefore improving our contribution to tackling climate change. If we do not deal with the problems in rural areas, there will be a serious difficulty in using price incentives through fuel duty and through vehicle excise duty to tackle climate change. It is precisely to enable that process to go forward that we have put forward the proposals that are before the House. It is unfortunate, given the arcane rules of the House, that we are not able fully to debate the other parts of the package. However, as we know from—

Mr. Deputy Speaker: Order. I think that the hon. Gentleman should stop at that point.

Stewart Hosie: If the hon. Member for Eastleigh (Chris Huhne) chooses to get to his feet later, we know what his speech will be about.
	The hon. Member for Orkney and Shetland(Mr. Carmichael), whom I like and admire, mentioned VAT on three or four occasions during his contribution on new clause 4. It is disappointing that new clause 4 does not use VAT gain to offset duty, which is my proposal. That is a sensible way around the problem, not least because a VAT windfall would not have a fiscal impact on the Treasury—it would minimise the gain, while not reducing the Government's expected take.
	New clauses 4 and 6 would allow the Treasury to define "sparsely populated rural areas". The hon. Member for Fareham (Mr. Hoban) and I have referred to the various definitions, such as the sevenfold model, which can cover up to 90 per cent. of the population and up to 30 per cent. of the land mass. Those definitions are clearly inappropriate, and those outcomes are clearly not what the Liberal Democrats intended. If an offset or a straight reduction in fuel duty were to apply to sparsely populated rural areas, the Treasury should define it in statute.
	There has been a great deal of discussion about derogation, which the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) has mentioned. We will not vote on new clause 4 tonight, which is disappointing because it may provide a way forward, and I hope that we can build a consensus on the issue.
	New clause 6 addresses the ongoing problems caused by high fuel prices. Last year, a similar amendment attracted cross-party support and the support of the Road Haulage Association, and I am delighted to tell the Financial Secretary that the RHA welcomes new clause 6 today—if I hold up the RHA press release to the right camera, someone will take a picture of it. The press release states:
	"Last year the Burns inquiry invested much time and effort in highlighting the plight of our industry and although we are still a long way from seeing a solution to the problem, it is encouraging to know that we have the support of the Scottish National Party. We shall now be pushing more strongly than ever to get the same recognition from our own Parliament; in particular the Chancellor of the Exchequer."

John Thurso: I shall shortly consider cost and I hope to be able to provide some detail to hon. Members who have asked questions. I say that now so that they do not try to intervene before I reach that point in my remarks.
	First, I shall comment briefly on new clause 6, about which the hon. Member for Dundee, East (Stewart Hosie) spoke. When I first read it, I had some sympathy with it but I soon decided that it was superficial sympathy. There are two fundamental problems with new clause 6 and the answer that he tried to provide.
	First, the major disadvantage that my constituents and those of some of my hon. Friends suffer is the huge differential in price for diesel and petrol, which can range, depending on the cycle, from 6p or 7p at its most benign through an average of approximately 9p in the five years that I have been tacking the price to close to 14p in May 2003, which was the worst example. The problem is, as the hon. Member for Dundee, East admitted when I intervened on him in Committee, that his proposed system locks in the inequality. The price nationally would be held but the inequality would remain.

John Thurso: I am grateful to the hon. Gentleman for that explanation, but that is not how I read his clause, and I do not think that that is the effect that most observers and commentators envisage. However, I started by having some sympathy for his proposal, and he and I clearly share a desire to do the right thing. I suggest that his objective of getting rid of the inequality suffered by our constituents who live in remote areas would best be achieved by supporting new clause 4.
	The problem is that we have become trapped by the wrong details and we are asking the wrong questions. The best approach would be to start by identifying the objective of the exercise. That objective is not to try to find a definition that fits; it is to identify the relatively small number of parts of the United Kingdom in which fuel is at such a premium that residents suffer great inequity. Let us look at that problem and design a scheme that addresses only that problem. All our discussions about whether to adopt formula X, Y or Z are irrelevant. New clause 4 would permit the Treasury to undertake the necessary work to address the problem. A number of schemes might fit the purpose, but the starting point should be to ask what we are seeking to achieve, and then to design the appropriate scheme.
	I now want to address the question of cost. In January 2000, the Highland Council and Highlands and Islands Enterprise commissioned EKOS Ltd to produce a report on the scale of the problem. It stated:
	"The total additional expenditures per annum on motoring by Highlands and Islands households, due to higher motoring costs as a whole, are approximately £88 million. This equates to approaching 3 per cent. of the region's Gross Domestic Product. Of this, £17.8 million per annum is attributable to higher fuel prices, of which approximately £2.7 million is in the form of additional VAT paid because of the higher fuel prices in the region."
	If we wished to get rid of the premium—at an average of 9p—we could simply apply the 9p to those figures, and the cost to the highlands and islands would be no more than £3.5 million, allowing for inflation since 2000. That is a long way short of the £2 billion or£3 billion that has been suggested. In seeking to achieve our objective in the highlands, the Treasury would therefore have to bear the phenomenal cost of only about £3.5 million. If I extrapolate that calculation across similar areas using similar definitions, I estimate that the total cost for the United Kingdom would be no more than £20 million. But even if I am out by 100 per cent., and the total would be nearer to £40 million, that would still be a very small sum to achieve that objective. Furthermore, if the expenditure of£17.8 million that I have just described were diverted into general expenditure, we could create 592 full-time equivalent jobs in the highlands.
	Another part of the equation that we need to consider is to be found in that same helpful report. It estimates that the average income in the highland area is much lower than in the rest of Scotland, and that prices are higher. Consequently, highland residents have 76p to spend on goods and services for every£1 that the average Scottish resident has. In other words, the average highland resident is about 24 per cent. worse off than those who live in the rest of Scotland. On top of that, they have to pay between10 and 20 per cent. more for their fuel. That is the genuine burden under which my constituents and those of my hon. Friends labour. Hon. Members may not have visited the areas to which I am referring. I extend an open invitation to all of them to do so at any time. I can do that, because my constituency is so far away that I know very few will take advantage of the invitation. Nevertheless, they will all be welcome.
	For many miles in those parts of my constituency there is no public transport of any kind. Where there is transport, it consists of a bus that travels in one direction on one day and travels back on the following day. That is not really a viable option. A car, or a private vehicle of some sort, is therefore an absolute necessity, particularly in much of rural Sutherland but also in many parts of Caithness. A real burden—real inequity—is suffered by people with the lowest incomes in the United Kingdom, and I think that reducing that burden is a worthwhile objective for us as legislators.
	I commend new clause 4. It does not seek to impose regulation; it merely seeks to give the Treasury power to do so. When I last raised the issue, during a Westminster Hall debate in 2003, I argued for a derogation. That was because I had always been told by the Treasury that it could not take this action. The Treasury's case was holed below the waterline when the French went and did it with the acquiescence and support of our Ministers. We need no longer ask "Can we do this or not?" We now know that we can, and the question has become "Why do the Government notdo it?"
	I am delighted to support the new clause. It gives the Treasury exactly the powers to deliver exactly the right solution at a very small cost to the taxpayer.

Alan Reid: New clause 4 is an enabling clause, which gives the Treasury power to specify lower rates of duty on fuel sold in remote rural areas. Accepting the new clause would allow discussions to begin; we could then decide exactly where lines should be drawn, and what the differentials should be. I urge the House to accept the new clause. It does not commit the Government to anything and it would not reduce the Treasury's revenue, but it would allow a debate to start.
	The sad fact is that fuel is sold in remote rural areas at a much higher price than in urban areas. People living in areas where there is no public transport alternative must pay far more for their fuel than those living in areas where there is such an alternative. Let me give some examples from my constituency to show how large the differentials can be. The difference between the cost of fuel on the islands of Mull and Islay and in, say, Glasgow is usually between 15p and 20p per litre. In the case of smaller islands such as Coll and Colonsay, the difference is about 30p per litre. That demonstrates the massive extra amount that people living on the islands must pay for their fuel. The additional cost has a damaging effect on the economies of those islands: not only does it have an impact on people's daily lives, but it discourages people from starting or continuing to run businesses.
	The remote communities in the highlands and islands have suffered years of population decline, which shows no sign of stopping. The high fuel prices are part of the problem: as I have said, they discourage people from opening and running businesses that create the jobs that will allow young people to remain in those remote communities. Encouraging people to stay in the remoter parts of Britain benefits the whole country. Every time the Government propose the building of tens of thousands of new houses in the south-east, Members of Parliament from that part of the country object. They should ask why market forces are pushing people towards it. The answer is that the cost of living in remote areas is becoming so great that the jobs are not there. Sustaining viable economic communities in remote parts of the country is beneficial to the country as a whole.
	There is an environmental justification forhigh fuel taxes: that they encourage people to use public transport alternatives. That environmental justification, however, does not exist in remote areas where there are no buses, and where it would be environmentally nonsensical for councils to subsidise bus services because buses would run with only one passenger on board. There is simply no environmental argument in favour of high fuel taxes in rural areas.

Alan Simpson: The provisions have been tabled by members of all parties represented in the House, and if you will allow me, Mr. Speaker, I shall speak to new clause 10 and new schedule 1 as well as to new clause 9.
	New clause 9 makes the revolutionary proposal that the Chancellor submit to the House an annual report on fiscal measures—and their success—to assist with energy efficiency, microgeneration, the development of local energy systems and water conservation measures, all of which are the subject of Government policies and targets. However, there is a gap between the wish to deliver those targets and the way in which we do so.
	It could be argued that it is not necessary to require the Chancellor to make such a report to the House. After all, in section 82 of the Energy Act 2004, which sets the basis of a Government policy promoting the development of microgeneration systems, there is a duty to report. Under the Climate Change and Sustainable Energy Act 2006, which was wonderfully piloted through the House by my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz), a duty will follow for the Department for Environment, Food and Rural Affairs and the Department of Trade and Industry to report, one on climate change and the other on the sustainable energy implications.
	It is worth noting that both those Acts started out with a presumption that there would need to be a Treasury reporting role addressing the fiscal measures that were necessary to make the policies work, but in order to get both Acts on the statute book, the Treasury required itself to be excluded from the reporting process. That leaves an enormous hole in the coherence of Government plans for tackling climate change and the delivery of sustainable energy strategies. How can we exclude fiscal measures from the sustainability programme, when they are at the very centre of it?
	In Germany the Government have transformed the energy market through an inversion of the fiscal rules that govern that market, so that microgeneration becomes the norm in developments, rather than being stuck on at the end. Elsewhere, particularly in Denmark and the Netherlands, fiscal measures have been used to promote the development of decentralised energy systems in ways that will offer a new approach to energy security in the 21st century.
	My argument is that for us in this country, this Parliament and this Government it is not coherent to talk about joined-up government if we suggest that fiscal measures, and a Treasury lead on those measures, should be the exemption clause in our overall sustainable energy strategies. Everyone knows of the Prime Minister's support for renewable energy, and the DTI estimates that 40 per cent. of UK energy needs could be met by decentralised energy by 2050. The difficulty is that no one seems to know how we get from where we are now to where we would like to be in 2050—at least, not without a clear fiscal lead that comes from the heart of Government and the heart of the Treasury.
	Every Budget report since 2002 has made reference to energy efficiency and the reduction of carbon emissions. Every Budget has brought with it some measure relating to domestic energy efficiency or microgeneration, but in most cases those have been limited to VAT adjustments or enhanced capital allowances. Fiscal measures have been small scale, piecemeal and unconnected to an overall Government strategy. A specific duty would allow us to develop such a fiscally strategic approach to how Britain will meet its climate change challenge and its fuel poverty targets in the 21st century.
	It is not that we do not know the scale of the problems that we face. It is just that we do not engage with the scale of the solutions that we need. Let me put that in context. From the figures provided to us by DEFRA, we know that carbon emissions over recent years have started to increase again and are 158.4 million tonnes a year. Of that, the domestic contribution to increasing carbon emissions has risen to 41.2 million tonnes a year.
	Fuel poverty is also back on the increase. The last figures that we have before Labour came to power are those for 1996, when 5.1 million people were officially recognised as living in fuel poverty in the UK. By 2003, a succession of Labour Government programmes had reduced that figure to 1.2 million. By 2005, however, the number of households was back up to 2.2 million, and the projection for this year is sitting at around3 million households now living in fuel poverty.
	Why have the numbers started to increase? One simple set of figures speaks volumes—those for the change in energy prices. Between January 2003 and March 2006, average gas prices in the UK increased by 57 per cent. and electricity prices by 37 per cent. Therefore, increasing energy prices are pushing more people back into fuel poverty than our Warm Front programme is able to take out of it.

Alan Simpson: I had forgotten about that point, so I am grateful to my right hon. Friend for reminding me of it. He is absolutely right to say that I tabled this measure in support of Government policy, rather than in opposition to it.
	Let me give the clearest example that I can offer. In our energy White Paper, the Government made a specific commitment by setting a target that 4.5 million of the homes with cavity walls should be fully cavity wall insulated by 2010. At present, there are about9 million homes with cavity walls throughout the UK. Each year, about 80,000 of those homes become fully insulated. If we were to deliver on our programme by 2010, there would have to be a sixfold increase in the rate at which the existing policy is working.
	How do we deliver such a sixfold increase? When we talk to people in the industry and the relevant sectors, they point out that by and large, the most successful time for intervention is when people are moving house. When people are in the process of buying a new home or trying to sell their existing home, they examine what they have to sell and consider what they want to buy. At that point, stamp duty is a significant financial consideration for many such people. If we could tie rebate measures into delivering the strategies and policies that we have set out our stall to carry out by 2010—without looking for new ones—we might deliver what we promised.
	There would be not only a big environmental plus to that, but a big creditability plus. There is nothing worse for the credibility of Parliament and Governments than making promises but failing to deliver on them. I am proposing a simple measure, and almost everyone in the industry is saying, "Give us this mechanism and we'll deliver the outcomes that you in Parliament say you want." The proposal has the support of the Energy Saving Trust, the Royal Commission on Environmental Pollution and the House's own Environmental Audit Committee.

Paul Goodman: The House owes a debt to the hon. Member for Nottingham, South (Alan Simpson) and to all his accomplices, if that is exactly the right word, for enabling us to debate microgeneration, energy efficiency and sustainability under the terms of the Finance Bill. Indeed, as the hon. Gentleman emphasised, those accomplices come from all parts of the House, and include my hon. Friend the Member for Buckingham (John Bercow), who is in his place.
	I will set out why the official Opposition intend to support new clause 9 if it is to be pressed to a vote, but why we do not feel, as matters stand, that we can support new clause 10 and new schedule 1, which are grouped with it. As for new clause 9, the right hon. Member for Birkenhead (Mr. Field), in his characteristically mischievous way, set out exactly why the Opposition would be likely to look on the new clause favourably. He referred, if I can read my scribble, to a market-led solution, which is exactly what the hon. Member for Nottingham, South has proposed.
	New clause 9 is rather more modest because it merely asks that the Chancellor should, within a year, produce a report on "fiscal measures" that would assist
	"energy efficiency...microgeneration...small scale local energy generation"
	and the
	"conservation of water by householders."
	It asks also that in producing his report
	"the Chancellor...shall...consult local authorities and such persons"
	that
	"have an interest in...enhancing the United Kingdom contribution to combating climate change...alleviating fuel poverty and conserving water supplies."
	To the Opposition, that seems to be a sensible and balanced way of speeding up the plans that the Government announced in March to increase local level energy production and to reduce carbon emissions. I suspect that many Members across the House share that view. The direction of travel outlined in the microgeneration strategy in March is welcome but it does not go far enough, so we believe that new clause 9 is helpful in pushing those plans forward.
	After eight years, Ministers are still reviewing planning policy and debating the potential of microgeneration technologies. The new clause is a positive response to the exciting potential of emerging microgeneration technologies. A most serious and robust strategy should have been an integral part of the energy review, not a precursor to it. Rather than laying down a challenge to the industry, we believe that the Government are following in its wake. Rather than setting the international pace, they are reacting to developments abroad. As it stands, the strategy will do little to address the sizable advantage that our international competitors enjoy in this sector or make a meaningful impact on carbon dioxide emissions before 2010.
	I mentioned economic growth on the one hand and environmental gain on the other because the two go hand in hand. The choice for the future is not between slower growth and lower emissions and faster growth and increased emissions. As the hon. Member for Nottingham, South said, between the option of either a highly centralised and extremely wasteful energy system in which power is, in effect, monopolised in the hands of a few producers, or a more decentralised and energy efficient system in which power generation is put into the hands of households and consumers lies an energy market in which other countries are leading the way. By the end of 2004, 200,000 Japanese homes had fitted photovoltaic cells, while 300,000 micro-renewable systems have been installed in Germany. As the hon. Member for Nottingham, South said, Germany is one of the countries that is giving a lead on such energy generation. More than 10 per cent. of householders in Sweden already use micro-renewable technology to heat their homes. Furthermore, the global market for new energy products and services, including micro-renewables, may be worth trillions of pounds over the course of this century. German companies already generate half the entire turnover of the global wind industry, while Japanese firms are at the forefront of fuel cell and hybrid engine technologies. American companies are leading the way in bringing affordable renewable technologies to the market. That is why my hon. Friend the Member for Tatton (Mr. Osborne) recently visited silicon valley to examine the work of pioneering green companies, which are building on ideas coming out of Stanford university.
	I concede that new clause 9 will not in itself make our micro-renewables sector more competitive or have a serious short-term impact on reducing emissions, but it has the potential to allow the Chancellor to return to the House in due course and on a regular basis with not only a series of fiscal measures and incentives, but a framework within which those measures should fit. My hon. Friend the Member for Tatton set out that framework in three parts shortly before his visit to silicon valley.
	First, the Government should consider how the planning system might take into account the benefits of micro-renewables while also recognising the need to protect the local and wider environment. As hon. Members know, the planning system is not always friendly to micro-renewables.
	Secondly, the Government should address the lack of information available to consumers. We need a clear and stable policy for micro-renewables, so consumers can make long-term predictions whether the cost of fitting a wind turbine or solar panel makes financial sense.
	Thirdly, the Government must tackle the inadequate infrastructure and regulatory framework. As well as the need to buy less electricity, part of the attraction of micro-renewables is the potential to make money by selling any excess electricity back into the national grid. In summer, for instance, photovoltaic cells—this comment is apposite given the current weather—may well generate more electricity than a household needs, especially if the occupiers are away on holiday. At the moment, however, that is being made much too difficult by inadequate infrastructure and burdensome regulations.
	I would doubtless go wide of new clauses 9 and 10 if I were to describe in detail how the national grid is largely configured for one-way energy flows, but we would like to see the grid operate more flexibly, which is why my hon. Friend the Member for Tatton has asked the quality of life policy group to examine the experiences of other countries that have introduced feed-in tariffs.
	In summary, we shall support new clause 9, since it makes a sensible and practical proposal which is enactable now. Since we will produce our own proposals in due course on the fiscal framework in relation to microgeneration and energy efficiency, we will not support the tax cut in new clause 10 and new schedule 1. I am sorry to disappoint the hon. Member for Nottingham, South in that regard, but if he presses new clause 9 to a vote, we will certainly support him.

Julia Goldsworthy: The Liberal Democrats sympathise with what the hon. Member for Nottingham, South (Alan Simpson) is seeking to achieve with new clause 10 and new schedule 1.
	I want to refer to early-day motion 214, which has attracted nearly 270 signatures and which relates to new clause 10. The hon. Member for South-West Bedfordshire (Andrew Selous) has added his name to it, so I shall be intrigued to see how the Whip on the Finance Bill advises his troops to vote.
	New clause 10 would add complication to the stamp duty system, if the discounts were to operate in the same way as the already complex slab system. Furthermore, I am not sure whether I would be happy to subsidise improvements, environmentally laudable as they may be, to the home of the right hon. Member for Witney (Mr. Cameron).
	It is a good opportunity to press the Governmenton how they intend to improve environmental standards in existing buildings. Like, I am sure, many other hon. Members, I look forward to the Financial Secretary's response. However, I have a couple of queries about enforcement.
	I understand that, if people say at the point of purchase that they wish to undertake improvements, they would qualify for a lower rate of stamp duty. However, what would happen if they did not carry out the improvements? Furthermore, with the Government proposing many plans to build many new houses, what incentives will there be to ensure that environmental measures are included when they are built?

Julia Goldsworthy: I thank the hon. Gentleman for that clarification.
	New clause 9 highlights many of the issues that I raised on Second Reading about the strategy for dealing with environmental measures—or its lack—in the Budget and the Bill, even though, in the week of the Budget, the Chancellor described lack of action on the environment as a scar on his conscience. New clause 9 tries to make explaining the strategy a requirement.
	Clearly, we have a fundamental problem. As the hon. Member for Nottingham, South pointed out, emissions are rising. Between 1997 and 2004, carbon dioxide emissions rose from 150 million tonnes to 158 million tonnes, of which domestic carbon dioxide emissions now account for 41.2 million tonnes. That figure, too, is increasing. There is a problem that must be tackled and the Government are not dealing with it at the moment.
	Whatever action the Government are taking, there is no shortage of words and consultation. The Treasury has spoken plenty of fine words. The Budget report of 2002 states:
	"The Government recognises that energy-efficiency improvements by the domestic sector are key to reducing fuel poverty and carbon emissions".
	The Budget report of 2003 states:
	"The Government recognises that energy-efficiency improvements in the domestic sector are key to reducing carbon emissions and alleviating fuel poverty."
	The Budget report of 2004 states:
	"The Energy White Paper highlights the key contribution that energy efficiency can make to the Government's energy policy goals."
	The Budget report of 2005 states:
	"Improving energy efficiency is the most cost-effective way of reducing greenhouse gas emissions and reducing the costs of fuel bills."
	In addition, there has been plenty of consultation. In 2002-03, there was consultation on the economic measures to improve domestic energy efficiency. In 2003-04, further consultation took place on those measures and, in 2004-05, stakeholder consultation took place on green landlord schemes to improve energy efficiency in the private sector.
	The Government and the Treasury have also made several proposals. In 2002, they introduced enhanced capital allowances for investment in heat pumps, air heaters and solar heaters and a 5 per cent. VAT rebate on grant-funded installation of factory insulated hot water tanks, micro-combined heat and power and renewable energy heating systems. In 2003, there was an additional consultation on specific measures. I could go on. However, the list ends in 2006, with the allocation of an additional £50 million to the low-carbon buildings programme.
	Of course, those changes are welcome but they hardly constitute a strategy. They are piecemeal. They encourage energy efficiency but only among a small number of people. Most householders will not be affected. We therefore need a strategy that means that the improvements will have an impact on a much wider group of people.
	The Department of Trade and Industry's own microgeneration strategy and low-carbon building programme consultation identified the wider benefits that microgeneration could bring. It showed that a clearer strategy would have the benefit of reducing carbon dioxide emissions as well as creating a series of other positive impacts on the people who would benefit from the improvements. The renewables innovation review suggests that buildings contribute about 47 per cent. of such emissions, and microgeneration has the potential to reduce that figure.
	The DTI's consultation paper also suggests that microgeneration would help to ensure reliable energy supplies, because its widespread use would reduce the load on the distribution network. More diverse local generation would also reduce transmission losses and, if deployed on a widespread scale, would help the UK to avoid becoming over-dependent on energy imports. Furthermore, microgeneration would help to promote competitive markets by introducing an additional aspect to the energy markets, giving people a wider choice of products from which to obtain their electricity and heat.
	Microgeneration would also offer the opportunity for affordable heating for all. Many people in my constituency face fuel poverty but do not have access to gas, so their only option is to install oil-firedcentral heating. Microgeneration would be a more environmentally friendly alternative and a more cost-effective way of tackling fuel poverty.
	For all those reasons, I welcome new clause 9. It represents a clear way for the Treasury to set out a strategy on this issue. It would have no financial implications and I will have no problem in supporting it. I shall also encourage my colleagues to do so, and I hope that the Minister will take the same approach.

Joan Walley: I shall speak only briefly on new clause 9. In response to the hon. Member for Wycombe (Mr. Goodman), I regard myself not as an accomplice but as part of a team that needs to drive through the agenda for tackling global warming. I congratulate my hon. Friend the Member for Nottingham, South (Alan Simpson) on ensuring that we have an opportunity to debate this most pressing issue in our deliberations on the Finance Bill. My only hope is that everyone understands these issues and that we can gain the support of the nation for these proposals on a similar scale to the support that they give to what happens on the football pitch. It is critical that these matters should be debated not only here in Parliament but right across the country.
	I have just two questions on these proposals for my hon. Friend the Financial Secretary. What are we waiting for? How can we move more quickly? I was encouraged by the comments made about these proposals by my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs to the all-party group on the environment earlier this evening. He said that he intended to put environmental issues centre stage, and that he was taking the lead at DEFRA to enable all Government Departments to play their part in tackling global warming. I desperately want the Treasury to do even more than has already been done to make progress.
	We have to ensure that we meet our targets, and to do that we must drive forward this agenda at national and local level. The Government have done a certain amount of reporting so far, but they could do more. New clause 9 will not cost the earth. It simply asks for an annual report from the Treasury so that we can have an informed national and local debate on the fiscal measures needed to speed up energy efficiency and introduce systems for microgeneration, small-scale energy generation and the conservation of water. That would signal to local authorities that they, too, were part of the team, and that their work in the local strategic partnerships was important in this regard. When the Environmental Audit Committee visited Woking, we saw the work that had been done there. Admittedly, it had perhaps been done on the basis of market initiatives rather than of environmental concerns, but it had nevertheless been done. We have also seen the work that has been done in Nottinghamshire. It is important that local authorities should be part of the UK's collective effort to address climate change. I do not see why we should not all sign up to that as quickly as possible—hence the important debate that we are having now.
	Let me say something about energy efficiency. My constituency has very low standards of heating and insulation, and a very high incidence of fuel poverty. The Government are spending a massive amount on initiatives to improve health through warmth. They should take great credit for improving building regulations, and for seeking to make improvements through the code for sustainable homes. However, as our Environmental Audit Committee's report on sustainable housing points out, even more could be done. The steps that the Government have taken could be greatly reinforced by a review of fiscal measures, as paragraph 50 of our report explains.
	We should take each and every opportunity to promote microgeneration, but we will need capital grant assistance to promote such technologies andhelp low-income households to benefit. The new Department for Communities and Local Government has already announced its intention to end planning restrictions on the domestic installation of wind turbines and solar panels. The Government are starting to make a great deal of progress. What is needed now is a way of overcoming the barriers to microgeneration, and securing the incentives that supply companies can provide for innovative action. It is vital for the Treasury to be part of all that.
	I welcome the opportunity to debate stamp duty. Our report said that the next steps should involve more support for the 70 per cent. of households that are owner-occupiers and mostly not in fuel poverty. We recommended that the Treasury should consider reducing both stamp duty and council tax in the case of houses built to higher environmental standards, and asked for consultation on the issue, to be completed by September 2007 as part of the spending review.
	I acknowledge that the Government have made a huge amount of progress, but we must accelerate it. It is vital to have a time frame consistent with consultation, but we also want to see real progress on the Select Committee's recommendations.

Elliot Morley: It is a pleasure to follow my hon. Friend the Member for Stoke-on-Trent, North (Joan Walley). I agree with much of what she said. I also welcome the new clause tabled by my hon. Friend the Member for Nottingham, South (Alan Simpson). The issues are important—there is a real debate to be had about how fiscal measures can encourage the developments that society needs, such as increased energy efficiency and the combating of climate change.
	The Treasury and, indeed, the Chancellor have an excellent record. The Chancellor has not been afraid of innovation through fiscal measures. The climate change levy, for instance, has been extremely successful. Climate change agreements have reduced emissions from major users. The pioneering of carbon trading in the United Kingdom has greatly influenced the European Union's scheme, and is a great success. Even measures that do not receive the attention that I think they deserve, such as the reforms of company car taxation, are having a huge impact on emissions and the buying habits of the companies that are major purchasers of cars in our country. That decision alone was a bold one. The fact that the Treasury took that decision demonstrates that it has not shied awayfrom the bold and radical use of fiscal measures to encourage environmental improvements. I greatly welcome that and the thrust behind the new clauses will continue it.
	Of course there is a role for reporting and some very good points have been raised. DEFRA has already made a commitment to providing an annual report on measures to reduce emissions and on the sort of steps that need to be taken. My hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz) brought forward measures in his successful Bill, which he introduced with great skill. I am pleased that the Government supported and endorsed his Bill, which included reporting measures both to the DTI and to DEFRA.
	There has always been a great deal of argument about the Government having a co-ordinated approach to sustainable and environmental measures. It is absolutely right that the Government adopt such an approach, so we need to think carefully about how best to carry out the reporting. We do not want individual reports from individual Departments—we need some co-ordination in a cross-government approach. Those issues can be discussed in respect of the shape of the reports and the commitments that have been given. That perhaps still requires some extra thought.
	There is no doubt about the great role for microgeneration or the great role of small-scale decentralised power. As my hon. Friend the Member for Stoke-on-Trent, North mentioned, there are also barriers. The buying price of electricity needs to be resolved, as it is unsatisfactory at present. I welcome the steps taken to remove some of the planning barriers to microgeneration. Other important issues are the cost of new technology and the Government's role in moving new technology from the development stage into the marketing stage. The inertia that acts as a barrier to new approaches, new ideas and innovation is another problem.
	Fiscal measures are crucial and I greatly welcome measures announced in the Budget, such as the additional £50 million to help promote microgeneration. Together with the existing budget, it amounts to about £70 million. Energy efficiency commitments are also important and the Government have been successful in developing them.
	I saw for myself how British Gas, as part of its contribution to its energy commitments, gave discounts on council tax for people who took up the option of having cavity wall insulation. It was hugely successful. The discounts were quite modest, but it proved attractive to consumers to secure the discount by taking up the subsidised cavity wall insulation that was part of the energy efficiency commitment. I very much hope that the EEC3 format provides an opportunity to develop some radical innovative ideas about using microgeneration and encouraging new measures for energy efficiency.
	Similar measures can be applied to stamp duty. Personally, I think that some form of discount on stamp duty is a good idea. I accept that it is a complicated argument: does it apply to new homes; can it be applied to retro-fit those who modernise their homes through energy efficiency measures; can it be linked to a new code of sustainable building; can it be applied to zero emission homes? There is a lot of debate on those matters and a great deal of working out still to be done about the shape that will emerge. For those reasons, I hope that my hon. Friend the Member for Nottingham, South will not press the new clause to the vote.
	There remains a lot of work to be done on the final shape, although I support the principle of the new clause. I know very well that within the Government there has to be discussion and issues of timing and costs have to be dealt with and resolved. I would not expect Treasury Ministers to accept the new clauses tonight, but we have seen what the Chancellor and the Treasury team can do in using fiscal measures to reach outcomes on climate change and sustainability. They have demonstrated that they are prepared to use such measures and apply them—and we know that they work and that they are successful. I recognise that the Government cannot accept these amendments as they stand, but I urge my hon. Friends on the Front Bench to give serious consideration to the very sound principles that they advocate. They make economic and financial sense, and they certainly make environmental sense in the light of the Government's ambitious objectives, targets and commitments. Every section of government has to make a contribution if we are to be successful.
	There is no doubt that fiscal measures and economic drivers are key to an overall integrated strategy. I hope that Ministers will give them serious consideration.

John Healey: This has been an interesting debate. It seems that the on-off relationship between the Tories and the Liberals in respect of environmental policies—that elusive cross-party consensus—may be on again.
	I think that the areas of agreement between the Government and my hon. Friend the Member for Nottingham, South (Alan Simpson) are muchgreater than the areas of disagreement. We agreeabout the importance of energy efficiency andwater conservation, and about the potential of microgeneration. We agree too with the assessment that the UK market for the available technologies is in its infancy, and that fiscal and other economic measures may have a role to play, along with regulation, public spending and, in some cases, information campaigns.
	The differences between the Government and my hon. Friend the Member for Nottingham, South result from the specific details of new clause 9. I hope that my hon. Friend will take account of what my hon. Friend the Member for Scunthorpe (Mr. Morley) said in that regard. Much of this ground was covered in the debates on the private Member's Bill successfully introduced by my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz). My hon. Friend the Member for Stoke-on-Trent, North (Joan Walley) made a number of telling points, and she is one of the most assiduous and consistent campaigners on the environment in the House.
	My hon. Friend the Member for Scunthorpe also made some telling points when he talked about the progress that has been made on the environment since 1999, and the important measures that the Government have introduced in that time. He played a pivotal part in that process, during his time as a Minister with responsibility for the environment. He rightly said that my right hon. Friend the Chancellor has an excellent record on the environment, and that he has used fiscal and other economic instruments to good effect.
	My hon. Friend the Member for Scunthorpe was also right in what he said about the climate change levy. The Opposition opposed it when it was introduced, and still do so now. The measure contributes almost one fifth of our emissions savings, as we pursue our climate change objectives. I must advise the Opposition that it is fine to will the ends but, in the end, they must back the means and the measures that will deliver those ends.
	We also recognise the importance of household energy efficiency, as my hon. Friend the Member for Nottingham, South and other hon. Friends urged. It is central to reducing further—

John Healey: Thank you, Madam Deputy Speaker.
	Household efficiency measures are of central importance if we want to reduce greenhouse gas emissions and if we want to provide greater security for the future. Improvements in energy efficiency are also essential if we are to reduce some of the unacceptable levels of fuel poverty in this country. That is why we have introduced all the measures to that end since 1997, many of which the hon. Member for Falmouth and Camborne (Julia Goldsworthy) outlined. She saved me a job by doing that, but she missed the support that the Government have given to the Energy Saving Trust, and the reduced rate of VAT on all the significant microgeneration technologies.
	I come now specifically to new clause 9. I remind my hon. Friend the Member for Nottingham, South, and all those who signed the new clause, that my right hon. Friend the Chancellor publishes two documents, the pre-Budget report and the Budget, that set out our analysis of the situation and our plans for appropriate fiscal measures in this area. If my hon. Friend looks at the Budget, he will see that chapter 7, which runs to24 pages, covers issues relating to water conservation, measures to protect natural resources and, in a substantial section, climate change and energy efficiency.
	Chapter 7 also sets out a range of new measures introduced at the Budget. It outlines the extra£20 million that we promised to help local authorities to promote energy efficiency, £50 million to try to give a boost to microgeneration markets and the installation of up to 25,000 microgeneration units in schools, community buildings and homes. It sets out a new agreement we have reached with energy suppliers to provide an extra 250,000 subsidised insulation installations by 2008. Those measures will help with our carbon savings and will help to reduce annual fuel bills for those in most poverty.
	New clause 10 and new schedule 2 set out proposals on stamp duty. We have been pressed for some time on the matter, but are still not convinced by the case for the proposals—and my hon. Friend the Member for Nottingham, South has not convinced us in his arguments tonight. The new clause and the new schedule duck some of the core questions, such as the level of relief, the qualifying threshold and the nature and scale of the rebates. It is hard to cost the impact of the proposals on the public purse and the contribution they might make to our climate change objectives.
	There is a series of principled problems with the proposed policy measure. First, it would make the design and collection of stamp duty much more complex and costly. Secondly, it would require someone—perhaps the conveyancer—to withhold money for a period. I am not sure whether my hon. Friend has discussed the proposal fully with conveyancers, because it will impose significant new burdens on small businesses at a time when we want to reduce them.

Hon. Members: No.
	 Division deferred till Wednesday 5 July, pursuant to Standing Order No. 41A (Deferred divisions).

Ordered,
	That the Strategic Health Authorities (Establishment and Abolition) (England) Amendment Order 2006 (S.I., 2006,No. 1448), and the Home Information Pack Regulations 2006 (S.I., 2006, No. 1503), be referred to Standing Committees on Delegated Legislation. —[Mr. Alan Campbell.]

Tony McNulty: I congratulate the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) on securing the debate. He has raised with me the case of PC Richard Keel, an officer in the West Mercia constabulary, who was twice injured on duty, once on 25 August 2004 and again on 16 April 2005, and who remains on sick leave as a result. I recognise PC Keel's work for the force and wish him and his family well in what must be a very difficult time for them. I endorse the hon. Gentleman's remarks about the recent double murder case and wish the force well in their investigation.
	In this, as in any other case relating to the welfare of officers, the responsibility for supporting the officer rests with the chief officer of police, and it is not for me to comment on a particular case in any regard whatsoever. I know from Her Majesty's inspectorate of constabulary that the West Mercia police force provides a good standard of occupational health and welfare services and that its systems ensure effective health and safety procedures. I shall say more about that shortly.
	The Government support the police service in maintaining officers' health, safety and well-being, as the hon. Gentleman suggests. That is critical to the forces' ability not only to deliver the police service that the public expects, but equally in terms of recruitment and retention.
	I would like to explain how we have been working with the Association of Chief Police Officers, the Association of Police Authorities, Her Majesty's inspectorate of constabulary, the Health and Safety Executive and the police staff associations and trade unions to improve occupational health services over the last five years. During that time, the service has significantly reduced sickness absence and ill-health retirements, both of which are indications of real improvements in the health and welfare of officers and staff. All those working in the service have reason to be proud of this achievement, which has meant that between 2001-02 and 2004-05 additional front-line strength equivalent to 1,500 officers has become available, enabling more officers to return to duty, serving the public, which is what they joined the service to do.
	The hon. Gentleman may know that in 2002 we launched the strategy for a healthy police service, an initiative with which the Chairman of the Home Affairs Committee was closely associated and which he personally launched. The strategy aimed to maintain police officers' and staff good health and reduce injuries. It provided forces with funding of £19 million over four years to help police officers and staff to return to work and carry out a full range of duties.
	Forces were given discretion to identify initiatives where that pump-priming activity would have the greatest impact. Initiatives included health promotion, stress counselling services, fast-track surgical interventions and attendance management training. An overall initial evaluation of this work shows strong anecdotal evidence that the funding has made a significant impact on forces' ability to manage and reduce sickness absence.
	West Mercia has used its funding to augment its occupational health department, introducing a physiotherapy scheme, stress audits and support for psychological disorders. Its physiotherapy pilot project in the Worcester division reduced absence due to musculoskeletal injuries by some 10 per cent. Those measures contributed to reducing sickness absence from an average of 13.2 days lost per officer in 2001-02 to an average of 87.8 hours, corresponding to approximately 11 days lost per officer in 2004-05.
	The strategy for a healthy police service recommended that managers work with occupational health to plan how the force can assist an officer's recovery and return to full performance, and forces agree a policy for the use of private health care with their police authority. Guidance has also been issued on delivering a fair and consistent approach towards early retirement due to ill health so that officers can continue to serve where they are capable of performing sufficient duties to make their retention operationally justifiable.
	There has been a reduction in the number of ill-health retirements over the years. In 1997-98, there were 14 ill-health retirements for every 1,000 officers in service across forces in England and Wales. By 2004-05 that rate had been reduced to 3 per 1,000. For West Mercia in 2004-05, the figure was 4 per 1,000. That is well within the target of 6.5 ill-health retirements per 1,000 that we set for forces in the national policing plan of November 2002.
	In June 2000, the Government published "Revitalising health and safety", which set a target to reduce the number of working days lost per 100,000 workers from work-related injury and ill health by30 per cent. by 2010. The current target for sickness absence in the police is eight days per year for police officers by 2008. The latest figures available for 2004-05 show the average hours lost was the equivalent of nine days per officer per year.
	We are not complacent and we know that we must continue to improve. The Home Office and ACPO have commissioned a review of the provision of health and safety arrangements in the police service that will make recommendations for improvement and provide a benchmarking standard. We will also be working with the Health and Safety Commission to evaluate progress from the initiatives of the strategy for a healthy police service and identify what elements have been most successful.
	As the hon. Gentleman suggests, policing is necessarily a difficult and often dangerous job, never without a risk, and I applaud his broad sentiments about the lot of our police when they are on the front line. But forces are increasingly well equipped to assess and manage such risks. Officer safety training, the use of protective equipment and the careful planning of operations all have a part to play. Reducing the number of incidents in which officers are injured is clearlythe first priority. When they are injured, better occupational health services have a real part to play in supporting recovery. The service's record in this area is good on the whole, but we will continue to work for further improvement in the interest of officers, police staff and the public.
	I am grateful to the hon. Gentleman for giving us the opportunity to debate the broad aspect of this important issue in the House. The Government recognise the importance of effective health and safety arrangements for officers and staff to the provision of effective policing. Performance on that has improved significantly since the launch of our strategy for a healthy police service and due to the funding to forces that we have provided. As I said, neither the Government, nor the police service in general, are complacent. We will continue to work with the police to maintain and improve the arrangements.
	I have to say two things in conclusion. First, the hon. Gentleman's comments about Ceausescu's Romania were misplaced and simply did not belong in what was otherwise an entirely reasonable contribution. Secondly, I repeat that, although he is a relatively new Member, it would still be wholly inappropriate for me to comment on an individual case, whether that is in terms of human resources, support from a force, an individual's relationship with the Police Federation, or any other matter. Such points would be more properly raised by the individual concerned—with or without his MP, I freely concede—at local level with the West Mercia force. I cannot comment at all on any of the more specific remarks that the hon. Gentleman made, and I certainly cannot, and will not, undertake to do any sort of bidding for the individual. I have to say, as I have said on other occasions, that such focuson an individual case in the Chamber is a wholly inappropriate use of the process of Adjournment debates.
	 Question put and agreed to.
	 Adjourned accordingly at twenty-six minutes past Eleven o'clock.